Manufacturer Liability for Harms Caused by Consumers to Others

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Manufacturer Liability for Harms Caused by Consumers to Others

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Title: Manufacturer Liability for Harms Caused by Consumers to Others
Author: Hay, Bruce L.; Spier, Kathryn E.

Note: Order does not necessarily reflect citation order of authors.

Citation: Bruce L. Hay & Kathryn E. Spier, Manufacturer Liability for Harms Caused by Consumers to Others, 95 Am. Econ. Rev. 1700 (2005).
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Abstract: Should the manufacturer of a product be held legally responsible when a consumer, while using the product, harms someone else? We show that if consumers have deep pockets, then manufacturer liability is not desirable. If homogeneous consumers have limited assets, then the best rule is "residual-manufacturer liability" where the manufacturer pays the shortfall in damages not paid by the consumer. Residual-manufacturer liability distorts the market quantity when consumers' willingness to pay is correlated with their propensity to cause harm. It distorts product safety when consumers differ in their wealth levels. In both cases, consumer-only liability may be preferred.
Published Version: http://www.aeaweb.org/articles.php?doi=10.1257/000282805775014416
Other Sources: http://www.nber.org/papers/w10972.pdf?new_window=1
http://www.law.harvard.edu/faculty/spier/pdf/manufacturerliabilityaer.pdf
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:12331807
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