Hay & Spier on Manufacturer Liability for Other-Caused Harms
Bruce L. Hay and Kathryn E. Spier (Harvard Law School and Northwestern University – Kellogg School of Management) have posted Manufacturer Liability for Harms Caused by Consumers to Others on SSRN. Here is the abstract:
- Should the manufacturer of a product be held legally responsible when a consumer, while using the product, harms someone else? We show that if consumers have deep pockets then manufacturer liability is not economically efficient. It is more efficient for the consumers themselves to bear responsibility for the harms that they cause. If homogeneous consumers have limited assets, then the most efficient rule is “residual-manufacturer liability” where the manufacturer pays the shortfall in damages not paid by the consumer. Residual-manufacturer liability distorts the market quantity when consumers’ willingness to pay is correlated with their propensity to cause harm. It distorts product safety when consumers differ in their wealth levels. In both cases, consumer-only liability may be more efficient.
Kathy Spier presented this paper at the USD/UCSD Law, Economics, & Politics series in the Spring. Recommended.