TIM FRIEHE

Product Liability Influences Incentives for Horizontal Mergers

Andreea Cosnita-Langlais, Tim Friehe, Eric Langlais

Abstract

This paper shows how product liability rules influence merger incentives. Consumers’ misperception of product risk critically influences which liability rule induces the strongest merger incentives. When consumers overestimate product risk, merger incentives under negligence and strict liability are similar and weaker than under no liability. When consumers underestimate product risk, merger incentives under negligence are weaker than those under strict liability but stronger than those under no liability.

Mot(s) clé(s)

Liability; Merger; Cournot; Market Structure

Product liability when cumulative harm is incurred by both consumers and third parties

Tim Friehe, Eric Langlais, Elisabeth Schulte

Abstract

Traditional law and economics analyses of product liability assume that expected harm is proportional to usage. This paper builds on Daughety and Reinganum (2013a, 2014) by assuming that harm increases and is convex in usage. In contrast to previous contributions, we analyze liability rules when not only consumers but also third parties incur harm. We show that the social ranking of liability rules previously established for the case in which only consumers suffer harm (strict liability dominates no liability and negligence)may be reversed if third party harm is sufficiently important.

Mot(s) clé(s)

Product liability; Cumulative harm; Environmental harm

On consumer preferences for (partial) products liability

Tim Friehe, Eric Langlais, Elisabeth Schulte

Abstract

Traditional law and economics analyses of products liability find that different liability regimes lead to the same market outcome, implying that risk-neutral consumers are indifferent between products liability and no products liability. We present a setup in which a group of consumers supports the implementation of products liability although its enforcement is costly. All consumers may prefer the same level of (partial) products liability.

Mot(s) clé(s)

Product Liability, Monopoly, Political Economy

On the Political Economy of Public Safety Investments

Tim Friehe, Eric Langlais

Abstract

This paper explores the interaction of private precaution and public safety investments when the latter are determined in a political process. We distinguish the scenarios
in which the median victim infuences public safety from the one in which the injurer lobbies the public agent, and analyze both negligence and strict liability with a defense of contributory negligence. We establish that the levels of injurer and victim care are always socially optimal for the equilibrium level of public safety. However, the equilibrium level of public safety differs from its fi…rst-best level and drastically depends on both the specifi…cs of the political process and the liability rule applied. This entails that the level of social costs is critically determined by the choice between liability rules for a given political process.

Mot(s) clé(s)

liability law, care levels, public safety, political economy, median voter,firm lobbying