Innovation, Tort Law, and Competition
24 Pages Posted: 10 Jan 2012
Date Written: January 10, 2012
In this paper, we examine the link between innovative activity on the part of firms, the competitive pressure to introduce innovations and punitive damage awards. While innovative activity brings forth valuable new products for consumers, competitive pressure in the ensuing innovation race induces firms to launch innovations too early, thereby raising the likelihood of severe product risks above the optimal failure rate. Introducing innovations too early may call for the application of punitive damages instead of mere compensation of harm caused, in order to decelerate such welfare-reducing innovation races.
Keywords: competition, innovation, punitive damages, tort law
JEL Classification: L13, K13, O31
Suggested Citation: Suggested Citation