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Liability, morality, and image concerns in product accidents with third parties

Author

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  • Christoph Rössler

    (University of Marburg)

  • Tim Friehe

    (University of Marburg
    CESifo)

Abstract

This paper explores how consumers’ moral and image concerns influence the equilibrium in a product-accident model in which third parties incur harm. We differentiate results according to whether the product is supplied by a monopolistic firm or competitive ones. Assuming incomplete compensation of third parties, we find that both moral and image concerns of consumers increase product safety in the context of a competitive market, while the monopolist’s product safety level varies exclusively with consumers’ morality. Comparing market outcomes, we find that the monopolist’s product safety levels may induce greater welfare than a competitive industry.

Suggested Citation

  • Christoph Rössler & Tim Friehe, 2020. "Liability, morality, and image concerns in product accidents with third parties," European Journal of Law and Economics, Springer, vol. 50(2), pages 295-312, October.
    • Handle: RePEc:kap:ejlwec:v:50:y:2020:i:2:d:10.1007_s10657-020-09666-2
    DOI: 10.1007/s10657-020-09666-2
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    References listed on IDEAS

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    Cited by:

    1. Tim Friehe & Christoph Rössler & Elisabeth Schulte, 2023. "Probing the case for manufacturer liability for harms caused by judgment-proof consumers to others," European Journal of Law and Economics, Springer, vol. 56(3), pages 443-460, December.
    2. Nigus, Halefom Yigzaw & Nillesen, Eleonora & Mohnen, Pierre & Di Falco, Salvatore, 2023. "Markets and socially responsible behavior: do punishment and religion matter?," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 572-593.

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    More about this item

    Keywords

    Product liability; Moral concerns; Image;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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