Summary: This paper extends the basic unilateral accident model to allow for Cournot
competition. Two firms compete with production input and prevention as strategic
variables under asymmetric capacity constraints. We find that liability regimes exert a
crucial influence on the equilibrium price and outputs. Strict liability leads to higher
output and higher risk compared to negligence. We also study the conditions under which
both regimes converge.
Key Words: Tort Law, Stric
