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TAXATION, FINES, AND PRODUCER LIABILITY RULES: EFFICIENCY AND MARKET STRUCTURE IMPLICATIONS
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Abstract
This paper addresses the comparative efficiency of liability rules and regulatory policy in competitive equilibria with endogenous product safety. Pigouvian taxation fails to achieve long-run social optimality. A policy involving accident fines and safety subsidization can achieve efficiency, although the optimal policy may involve taxation, not subsidization, of product safety.Public Economics,