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| Coestier, B.; Gozlan, Estelle; Marette, Stephan. |
| Under a market setting, we analyse the impact of legal liability on prevention, taking into account the possible limited wealth of firms. We show that under strict liability, firms my choose ex ante not to be able to fully indemnify victims ex post: whatever the market structure, they may use limited liability strategically by investing in prevention in excess of what is socially optimal. The negligence rule prevents firms from over-investment. For high levels of damages, under both liability rules, firms exert an insufficient effort of prevention. A welfare analysis established that when the judgment proof problem is acute, the optimal public intervention ranges from banning the production to imposing the negligence rule. |
| Tipo: Conference Paper or Presentation |
Palavras-chave: Marketing. |
| Ano: 2002 |
URL: http://purl.umn.edu/8531 |
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| Bureau, Jean-Christophe; Gozlan, Estelle; Marette, Stephan. |
| Focusing on the issue of food safety, we consider a framework of repeated purchases under the scenario of imperfect information on product quality (adverse selection and experience goods). A firm in a northern country can more easily detect tainted products than can a southern one. When imports are banned, the northern firm does not always signal the actual quality of its products. Competition from imports may lead the northern firm to test the quality of its products as a way to differentiate itself from foreign competitors. Consumers benefit from the disclosure of information on quality, even though borders are open to products of uncertain quality. However, competition from imports also increases the cost of signaling high quality. This can be... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Adverse selection; North-south trade; Signaling; Trade; International Relations/Trade. |
| Ano: 2001 |
URL: http://purl.umn.edu/18636 |
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