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RISK, INFORMATIONAL ASYMMETRY AND PRODUCT LIABILITY: An Enquiry Into Conflicting Objectives

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  • Ram Singh

Abstract

. Risky products inflict two costs on society; the accident and the insurance costs. The expansion in the scope of product liability since the late 1970s has increased the cost of third‐party liability insurance. However, the economic analysis has, traditionally, focused on only the accident costs. Some recent works suggests a strict trade‐off between minimization of the accident costs and the insurance costs. In this paper, we extend the analysis by considering both types of costs. An efficiency characterization of product liability rules is provided by assuming informational asymmetry about the risk. We show that it is possible to achieve efficiency with respect to the insurance costs as well as the care levels.

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  • Ram Singh, 2009. "RISK, INFORMATIONAL ASYMMETRY AND PRODUCT LIABILITY: An Enquiry Into Conflicting Objectives," Pacific Economic Review, Wiley Blackwell, vol. 14(1), pages 89-112, February.
    • Handle: RePEc:bla:pacecr:v:14:y:2009:i:1:p:89-112
    DOI: 10.1111/j.1468-0106.2009.00437.x
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    Cited by:

    1. Allan M Feldman & Ram Singh, 2021. "Equilibria under Liability Rules: How the standard claims fall apart," Working papers 315, Centre for Development Economics, Delhi School of Economics.
    2. Feldman Allan & Singh Ram, 2021. "Equilibria Under Negligence Liability: How the Standard Claims Fall Apart," Review of Law & Economics, De Gruyter, vol. 17(1), pages 1-33, March.
    3. Baumann, Florian & Friehe, Tim & Rasch, Alexander, 2016. "Why product liability may lower product safety," Economics Letters, Elsevier, vol. 147(C), pages 55-58.

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