“Product Liability in Markets for Vertically Differentiated Products”

Academic exploration of product liability as to product safety levels:

American Law and Economics Review, Volume 20, Issue 1, 1 April 2018, Pages 46–81, https://doi.org/10.1093/aler/ahx013

Published:   14 July 2017

The abstract explains:

“This article shows that shifting losses from consumers with heterogeneous harm levels to vertically differentiated duopolists increases product safety levels, while narrowing the degree of product differentiation. Our setup features observable (but possibly nonverifiable) product safety levels and firms subject to strict liability according to a parametric liability specification. Firms’ expected liability payments depend on both product safety and price levels which critically influences the repercussions of shifting losses to firms. From a social standpoint, shifting some losses to firms is always beneficial.”