Abstract

http://ssrn.com/abstract=633632
 
 

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Manufacturer Liability for Harms Caused by Consumers to Others


Bruce L. Hay


Harvard Law School

Kathryn E. Spier


Harvard University - Law School - Faculty; National Bureau of Economic Research (NBER)

December 2004

NBER Working Paper No. w10972

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 economically efficient. It is more efficient for the consumers themselves to bear responsibility for the harms that they cause. If homogeneous consumers have limited assets, then the most efficient 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 more efficient.

Number of Pages in PDF File: 26

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Date posted: December 20, 2004  

Suggested Citation

Hay, Bruce L. and Spier, Kathryn E., Manufacturer Liability for Harms Caused by Consumers to Others (December 2004). NBER Working Paper No. w10972. Available at SSRN: http://ssrn.com/abstract=633632

Contact Information

Bruce L. Hay
Harvard Law School ( email )
1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States
617-496-8277 (Phone)
Kathryn E. Spier (Contact Author)
Harvard University - Law School - Faculty ( email )
1575 Massachusetts
Hauser 302
Cambridge, MA 02138
United States
(617) 496-0019 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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