Work

Product liability influences incentives for horizontal mergers

Year: 2025

Type: article

Abstract: This paper explores how product liability rules affect merger incentives, with consumer risk perception as a key factor. We find a striking contrast: when consumers overestimate product risk, no liability generates the strongest merger incentives, while strict liability and negligence have weaker, similar effects. Conversely, when consumers underestimate risk, strict liability maximizes merger incentives, and no liability minimizes them. We also demonstrate that horizontal mergers without efficiency effects can unexpectedly increase welfare under no liability or negligence when consumers underestimate risk—a result that is impossible under strict liability.

Source: International Review of Law and Economics

DOI: 10.1016/j.irle.2025.106302

Authors: Andreea Cosnita-Langlais, Tim Friehe, Eric Langlais

Institutions: Centre National de la Recherche Scientifique, Université Paris Nanterre, EconomiX, Philipps University of Marburg

Language: English

Topic: Law, Economics, and Judicial Systems

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $2,990