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Strategic R&D Investment Under Liability Law

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  • Alfred Endres
  • Tim Friehe

Abstract

This paper analyzes the incentives of duopolists to invest in advanced care technology under liability law. We establish that investment incentives under strict liability are in line with the taxonomy of Fudenberg and Tirole (1984), whereas the investment incentives under negligence most likely are not. Indeed, investment incentives under negligence are dependent on the timing of the policy maker’s regulations, whether or not due care is firm specific, and whether or not precautionary measures are durable .

Suggested Citation

  • Alfred Endres & Tim Friehe, 2012. "Strategic R&D Investment Under Liability Law," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 19(3), pages 359-376, November.
    • Handle: RePEc:taf:ijecbs:v:19:y:2012:i:3:p:359-376
    DOI: 10.1080/13571516.2012.715270
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    References listed on IDEAS

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    1. Shavell, Steven, 2007. "Liability for Accidents," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 1, chapter 2, pages 139-182, Elsevier.
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    Cited by:

    1. Florian Baumann & Tim Friehe, 2015. "Optimal Damages Multipliers in Oligopolistic Markets," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 171(4), pages 622-640, December.

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