Should consumers be permitted to waive products liability?
Subtitle: product safety, private contracts, and adverse selection
By: Albert Choi and Kathryn E. Spier
Contributors: Spier, Kathryn E.; John M. Olin Center for Law, Economics, and Business
Series: Discussion paper -- no. 680; Discussion paper (John M. Olin Center for Law, Economics, and Business : Online) -- no. 680.
Publisher: Harvard Law School
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] :
Subjects: Products liability; Covenants not to sue; Product safety; Law and legislation; Hold harmless agreements
Description: "Abstract: A potentially dangerous product is supplied by a competitive market.  The likelihood of a product-related accident depends on the unobservable precautions taken by the manufacturer and on the type of the consumer.  Contracts include the price to be paid by the consumer ex ante and stipulated damages to be paid by the manufacturer ex post in the event of an accident.  Although the stipulated damage payments are a potential solution to the moral hazard problem, firms have a private incentive to reduce the stipulated damages (and simultaneously lower the up front price) in order to attract the safer consumers who are less costly to serve.  The competitive equilibrium--if an equilibrium exists at all--features suboptimally low stipulated damages and correspondingly suboptimal levels of product safety.  Imposing tort liability on manufacturers for uncovered accident losses--and prohibiting private parties from waiving that liability-- can improve social welfare"--John M. Olin Center for Law, Economics, and Business web site.
Notes: Title from PDF file as viewed on 10/29/2010.

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