TY  - JOUR
AU  - Hay,Bruce
AU  - Spier,Kathryn E.
TI  - Manufacturer Liability for Harms Caused by Consumers to Others
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10972
PY  - 2004
Y2  - December 2004
UR  - http://www.nber.org/papers/w10972
L1  - http://www.nber.org/papers/w10972.pdf
N1  - Author contact info:
Bruce Hay
Harvard University
Tel: (617) 496-8277
E-Mail: hay@law.harvard.edu

Kathryn E. Spier
Hauser Hall 302
Harvard Law School
1575 Massachusetts Avenue
Cambridge, MA 02138
Tel: 617/496-0019
E-Mail: kspier@law.harvard.edu
AB  - 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.
ER  -