Firm Liability When Third Parties and Consumers Incur Cumulative Harm

This paper analyzes liability rules when consumers and third parties/the environment incur harm. Expected harm is convex in the level of output and modeled as a power function. We show that the social ranking of liability rules previously established for the case in which only consumers suffer harm...

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Bibliographic Details
Published in:Environmental & resource economics 2022-01, Vol.81 (1), p.53-71
Main Authors: Friehe, Tim, Langlais, Eric, Schulte, Elisabeth
Format: Article
Language:English
Subjects:
Consumers
Cumulative harm
Economic Policy
Economics
Economics and Finance
Environmental Economics
Environmental harm
Environmental Law/Policy/Ecojustice
Environmental Management
Humanities and Social Sciences
Liability
Negligence
Strict liability
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Summary:This paper analyzes liability rules when consumers and third parties/the environment incur harm. Expected harm is convex in the level of output and modeled as a power function. 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 harm to third parties or the environment is sufficiently important.
ISSN:1573-1502
0924-6460
1573-1502
DOI:10.1007/s10640-021-00617-2