Skip Navigation

This Article
Right arrow Full Text (PDF)
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrow Search for citing articles in:
ISI Web of Science (11)
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Daughety, A. F.
Right arrow Articles by Reinganum, J. F.
Right arrow Search for Related Content
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

© 1997 Oxford University Press

Everybody Out of the Pool: Products Liability, Punitive Damages, and Competition

Andrew F. Daughety and Jennifer F. Reinganum

Vanderbilt University
Vanderbilt University

We examine how punitive damages and competitive forces generate equilibria which reveal the safety of a product. We model the monopoly (duopoly) provision of a product whose safety is unobservable to consumers prior to purchase, but is known by the firm(s) and can be signaled via the product's price and safety claims. Consumers' likelihood of purchase is based on the price and claim combination(s) they observe, thereby reducing the incentive for mimicry of the safer product by the less safe one. Nevertheless, absent punitive damages, there is a broad portion of the parameter space wherein no revealing equilibria exist. We characterize the minimal punitive damages necessary to ensure revelation; moreover, we find that competition reduces the minimal level of punitive damages. Competition and punitive damages are complementary in that they jointly make consumer choice more effective by creating conditions under which revealing equilibria can exist.


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?




Disclaimer: Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.