Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/32232
Authors: 
Baumann, Florian
Friehe, Tim
Grechenig, Kristoffel
Year of Publication: 
2010
Series/Report no.: 
Preprints of the Max Planck Institute for Research on Collective Goods 2010,03
Abstract: 
This article shows that it may be socially optimal to grant accident victims less than full compensation. In our framework, firms are liable under product liability but also invest in care to prevent consumers switching to competitors. Affecting the partition of consumers by means of care-taking is not desirable from a social standpoint. Consequently, it may be optimal to reduce liability below full compensation in order to adjust firms' care incentives.
Subjects: 
Tort law
product liability
care level
asymmetric information
switching
JEL: 
K13
Document Type: 
Working Paper

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