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- Title
Liability Rules and Income Distribution in Product Liability.
- Authors
Hamada, Koichi
- Abstract
The purpose of this paper is to explore the implication of the price relationship on the product liability. In Section 1, it shall analyze the case of product liability where the probability of damage is independent of the level of care taken by producers and consumers. It will be shown in a partial equilibrium framework that not only resource allocation but also income distribution in terms of consumers' and producers' surplus is unaffected by the liability rule, provided that consumers are fully informed of the intensity and the probability of the danger. In Section II, the assumption of the independence of the probability of damage from the care level is dropped. Thus, neither the resource allocation nor the distribution between the consumers' and the producers' surplus is affected by the liability rule, provided that the consumers are fully aware of the probability and the magnitude of the damage due to the, product hazard, and that the victims are limited to the purchasers of the product.
- Subjects
PRODUCT liability; PRICES; RESOURCE allocation; SURPLUS (Economics); ECONOMIC equilibrium; INCOME distribution; LEGAL liability; DAMAGE claims
- Publication
American Economic Review, 1976, Vol 66, Issue 1, p228
- ISSN
0002-8282
- Publication type
Article