Innovation, tort law, and competition
Journal of Institutional and Theoretical Economics , Volume 169 - Issue 4 p. 703- 719
We examine the link between innovative activity on the part of firms, the competitive pressure to introduce innovations, and optimal damages awards. While innovative activity brings forth valuable new products for consumers, competitive pressure in the ensuing innovation race induces firms to launch innovations too early, thereby raising the likelihood of severe product risks above the optimal failure rate. Introducing innovations too earlymay call for the application of punitive damages instead of mere compensation of harm caused, in order to decelerate such welfare-reducing innovation races.
|Journal of Institutional and Theoretical Economics|
|Organisation||Rotterdam Institute of Law and Economics|
Baumann, F, & Heine, K. (2013). Innovation, tort law, and competition. Journal of Institutional and Theoretical Economics, 169(4), 703–719. doi:10.1628/093245613X671201