Market Share Liability and its Alternatives

31 Pages Posted: 29 Feb 2000

See all articles by Devra L. Golbe

Devra L. Golbe

Hunter College, City University of New York; Graduate Center, City University of New York

Lawrence J. White

New York University (NYU) - Leonard N. Stern School of Business, Department of Economics

Date Written: February 15, 2000

Abstract

An injured party can sometimes identify the class of product that injured her, but not the particular firm that was the source of harm. One possible approach to liability is a rule based on the market shares of the firms. Some commentators have argued that this approach violates the identification requirement and rarely yields efficient incentives for the reduction of harm; their favored alternative apparently is to impose no liability on defendants. While we agree that market share liability will only rarely yield the perfectly efficient solution, a standard of perfect efficiency is unrealistic, since most situations where market share liability is proposed are ones of imperfect information and thus where a perfectly efficient remedy is unobtainable. We compare the efficiency of the market share liability approach to two alternatives: no liability (i.e., victim liability), and multiple joint and several with no contribution that is, placing 100% of the industry's liability on each defendant. We argue that efficiency often dictates increasing liability from the market-share standard, rather than reducing it to zero.

JEL Classification: K13

Suggested Citation

Golbe, Devra L. and White, Lawrence J., Market Share Liability and its Alternatives (February 15, 2000). New York University, Center for Law and Business Paper No. 99-014. Available at SSRN: https://ssrn.com/abstract=209809 or http://dx.doi.org/10.2139/ssrn.209809

Devra L. Golbe (Contact Author)

Hunter College, City University of New York ( email )

695 Park Avenue
New York, NY 10021
United States
212-772-5408 (Phone)
212-772-5398 (Fax)

Graduate Center, City University of New York ( email )

365 Fifth Avenue
New York,, NY 10016
United States

Lawrence J. White

New York University (NYU) - Leonard N. Stern School of Business, Department of Economics ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

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