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Liability versus Regulation for Dangerous Products When Consumers Vary in Their Susceptibility to Harm and Misperceive Risk

Author

Listed:
  • Thomas J. Miceli

    (University of Connecticut)

  • Rebecca Rabon

    (University of Connecticut)

  • Kathleen Segerson

    (University of Connecticut)

Abstract

When consumers vary in their susceptibility to product-related harm, safety regulation dominates liability because when consumers bear their own damages they are induced to selfselect in their purchase decisions. When consumers also misperceive risk, however, liability may be preferred because the price of the product accurately conveys the risk, thereby eliminating any distortions due to misperception. Generally, regulation is preferred when consumers accurately perceive risk, and liability is preferred when they do not. JEL Classification: K13, L51 Key words: Products liability, regulation, risk perceptions

Suggested Citation

  • Thomas J. Miceli & Rebecca Rabon & Kathleen Segerson, 2012. "Liability versus Regulation for Dangerous Products When Consumers Vary in Their Susceptibility to Harm and Misperceive Risk," Working papers 2012-15, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:2012-15
    as

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    References listed on IDEAS

    as
    1. A. Mitchell Polinsky & William P. Rogerson, 1983. "Products Liability, Consumer Misperceptions, and Market Power," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 581-589, Autumn.
    2. Michael Spence, 1977. "Consumer Misperceptions, Product Failure and Producer Liability," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 561-572.
    3. Steven Shavell, 1984. "A Model of the Optimal Use of Liability and Safety Regulation," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 271-280, Summer.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    products liability; regulation; risk perceptions;
    All these keywords.

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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