Product and Stock Market Responses to Automotive Product Liability Verdicts

John Adams and

JA

John Adams RAND

Steven Garber

SG

Steven Garber RAND

Discussants: Daniel L. Rubinfeld and

DLR

Daniel L. Rubinfeld

Sam Peltzman

SP

Sam Peltzman

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.