The Law and Economics of Products Liability

Abstract:     
This paper presents a largely positive analysis of products liability law, in the sense that it aims to predict the incentive effects and the welfare consequences of the law, with close regard to its specific legal tests and the real-world constraints that impinge on these tests. The other major part of this paper is a normative assessment of the parts of products liability law that should be reformed. In contrast with the prevailing law and economics literature suggesting that products liability law reduces social welfare, I argue that the law probably improves social welfare, though it is in need of reform in several respects.

Number of Pages in PDF File: 52

Keywords: products liability, strict liability, risk utility, consumer expectations, design defect, manufacturing defect, failure to warn

JEL Classification: K00, K13

working papers series