Abstract

http://ssrn.com/abstract=2300971
 


 



Producer Liability and Competition Policy When Firms are Bound by a Common Industry Reputation


Andrzej Baniak


Central European University (CEU) - Department of Economics

Peter Grajzl


Washington and Lee University - Department of Economics

A. Joseph Guse


Washington and Lee University - Williams School of Commerce, Economics, and Politics

November 18, 2013


Abstract:     
We contrast the laissez-faire regime with the regime of strict producer liability, and draw the implications for competition policy, in a setting where oligopolistic firms cannot differentiate themselves from rivals but rather are bound by a common industry reputation for product safety. We show that, first, unlike in the traditional products liability model, firms' incentives to invest in precaution depend on market structure. Second, depending on the magnitude of expected damages awarded by the courts, laissez-faire can welfare-dominate strict producer liability. Third, the relationship between social welfare and industry size, and hence the role for competition policy, depends on the institutional regime governing the industry. Under some circumstances, restricting industry size is unambiguously welfare-enhancing.

Number of Pages in PDF File: 33

Keywords: products liability, industry reputation, oligopoly, industry size, competition policy

JEL Classification: K13, L13, D43

working papers series


Download This Paper

Date posted: July 29, 2013 ; Last revised: November 18, 2013

Suggested Citation

Baniak, Andrzej and Grajzl, Peter and Guse, A. Joseph, Producer Liability and Competition Policy When Firms are Bound by a Common Industry Reputation (November 18, 2013). Available at SSRN: http://ssrn.com/abstract=2300971 or http://dx.doi.org/10.2139/ssrn.2300971

Contact Information

Andrzej Baniak
Central European University (CEU) - Department of Economics ( email )
Nador u. 9.
Budapest H-1051
Hungary
(36) 1 327-3231 (Phone)
(36) 1 327-3232 (Fax)
Peter Grajzl (Contact Author)
Washington and Lee University - Department of Economics ( email )
Lexington, VA 24450
United States
HOME PAGE: http://home.wlu.edu/~grajzlp/
A. Joseph Guse
Washington and Lee University - Williams School of Commerce, Economics, and Politics ( email )
Lexington, VA 24450
United States
Feedback to SSRN


Paper statistics
Abstract Views: 232
Downloads: 283
Download Rank: 60,752

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.328 seconds