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Innovation, Tort Law, and Competition

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  • Florian Baumann
  • Klaus Heine

Abstract

We examine the link between innovative activity on the part of firms, the competitive pressure to introduce innovations, and optimal damages awards. While innovative activity brings forth valuable new products for consumers, competitive pressure in the ensuing innovation race induces firms to launch innovations too early, thereby raising the likelihood of severe product risks above the optimal failure rate. Introducing innovations too early may call for the application of punitive damages instead of mere compensation of harm caused, in order to decelerate such welfare-reducing innovation races.

Suggested Citation

  • Florian Baumann & Klaus Heine, 2013. "Innovation, Tort Law, and Competition," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(4), pages 703-719, December.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201312)169:4_703:itlac_2.0.tx_2-1
    DOI: 10.1628/093245613X671201
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    Cited by:

    1. Gérard Mondello & Evens Salies, 2018. "The Unilateral Accident Model under a Constrained Cournot-Nash Duopoly," GREDEG Working Papers 2018-14, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    2. Gérard Mondello & Evens Salies, 2016. "Tort law under oligopolistic competition," SciencePo Working papers Main hal-03459225, HAL.
    3. Ping Lin & Tianle Zhang, 2022. "Product liability, multidimensional R&D and innovation," Journal of Economics, Springer, vol. 136(1), pages 25-45, June.
    4. repec:hal:spmain:info:hdl:2441/5a1unjmoh881mrfbrlqhebkbba is not listed on IDEAS
    5. repec:spo:wpmain:info:hdl:2441/5a1unjmoh881mrfbrlqhebkbba is not listed on IDEAS

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    More about this item

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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