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Firm Liability When Third Parties and Consumers Incur Cumulative Harm

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  • Schulte, Elisabeth
  • Friehe, Tim
  • Langlais, Eric

Abstract

This paper analyzes liability rules when consumers and third parties/the environment incur harm. Expected harm is convex in the level of output and modeled as a power function. We show that the social ranking of liability rules previously established for the case in which only consumers suffer harm (strict liability dominates no liability and negligence) may be reversed if harm to third parties or the environment is sufficiently important.

Suggested Citation

  • Schulte, Elisabeth & Friehe, Tim & Langlais, Eric, 2021. "Firm Liability When Third Parties and Consumers Incur Cumulative Harm," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242339, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc21:242339
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    References listed on IDEAS

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    1. Daughety, Andrew F & Reinganum, Jennifer F, 1995. "Product Safety: Liability, R&D, and Signaling," American Economic Review, American Economic Association, vol. 85(5), pages 1187-1206, December.
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    5. Mateus Dias & Rudi Rocha & Rodrigo R Soares, 2023. "Down the River: Glyphosate Use in Agriculture and Birth Outcomes of Surrounding Populations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(6), pages 2943-2981.
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    7. Bruce Hay & Kathryn E. Spier, 2005. "Manufacturer Liability for Harms Caused by Consumers to Others," American Economic Review, American Economic Association, vol. 95(5), pages 1700-1711, December.
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    16. Henry van Egteren & R. Smith, 2002. "Environmental Regulations Under Simple Negligence or Strict Liability," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(4), pages 367-394, April.
    17. Andrew F. Daughety & Jennifer F. Reinganum, 2006. "Markets, torts, and social inefficiency," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 300-323, June.
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    19. Andrew F. Daughety & Jennifer F. Reinganum, 2013. "Cumulative Harm, Products Liability, and Bilateral Care," American Law and Economics Review, American Law and Economics Association, vol. 15(2), pages 409-442.
    20. Friehe, Tim & Langlais, Eric & Schulte, Elisabeth, 2018. "On consumer preferences for (partial) products liability," Economics Letters, Elsevier, vol. 173(C), pages 128-130.
    21. Dias, Mateus & Rocha, Rudi & Soares, Rodrigo R., 2019. "Glyphosate Use in Agriculture and Birth Outcomes of Surrounding Populations," IZA Discussion Papers 12164, Institute of Labor Economics (IZA).
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    Cited by:

    1. Miriam C. Buiten, 2024. "Product liability for defective AI," European Journal of Law and Economics, Springer, vol. 57(1), pages 239-273, April.

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    More about this item

    Keywords

    Liability; Cumulative harm; Environmental harm;
    All these keywords.

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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