BPEA | 1998: Microeconomics

Product and Stock Market Responses to Automotive Product Liability Verdicts

Microeconomics 1998

CLAIMS ABOUT DETRIMENTAL economic effects of product liability are a cornerstone of efforts by tort reformers to rally support. It seems fair to say, however, that existing evidence about economic effects of product liability is sketchy. In this paper, we attempt to develop information about a narrow but important piece of a very complex puzzle. In particular, we develop quantitative evidence about a component of automobile manufacturers’ incentives stemming from product liability by examining effects of trial verdicts on company stock prices and on new vehicle sales. We know of no similar study.