Limited Liability and Imperfect Information—On the Existence of Safety Equilibria Under Products Liability Law |
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Authors: | Alfred Endres Andreas Lüdeke |
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Institution: | (1) Department of Economics, University of Hagen, Profilstra 8, 58084 Hagen, Germany |
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Abstract: | In the literature on the economics of tort law the Cournot-Nash equilibrium concept has been undisputed. In particular, the existence of a Cournot-Nash safety equilibrium has been taken for granted, given the usual convexity assumptions. In this paper a simple model of strict liability with the defence of contributory negligence is considered. Liability is assumed to be limited. It is shown that for a certain range of liability limits no Cournot-Nash safety equilibrium in pure strategies exists. A mixed strategy equilibrium exists but it turns out to be suboptimal. |
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Keywords: | Tort Law Product Liability Product Safety Mixed Strategy Equilibrium Imperfect Information |
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