Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/306393 
Year of Publication: 
2023
Citation: 
[Journal:] European Journal of Law and Economics [ISSN:] 1572-9990 [Volume:] 56 [Issue:] 3 [Publisher:] Springer US [Place:] New York, NY [Year:] 2023 [Pages:] 443-460
Publisher: 
Springer US, New York, NY
Abstract: 
We study whether it is socially desirable to hold a monopolistic firm liable for the harm its potentially judgment-proof consumers inflict on third parties. Consumers' judgment-proofness limits potential product differentiation by pooling different consumer types with uniform liability exposure. The firm's safety choices are distorted in both regimes under consideration: consumer-only liability and residual-manufacturer liability. We find that residual-manufacturer liability dominates consumer-only liability if the monopolistic firm can observe consumers' types, or if consumers' types are not observable but heterogeneity stems only from their asset levels. However, if the monopolistic firm cannot observe consumers' types and heterogeneity stems from their harm levels, it is more difficult to make a case for residual-manufacturer liability.
Subjects: 
Liability
Judgment proofness
Safety
Precaution
Consumer
JEL: 
K13
L12
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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