Product safety for a monopolist under strict liability (Q1061000)

This paper views strict producer liability as essentially requiring the producer to provide a tie-in sale of full coverage insurance to its customers. The output and safety levels under strict producer liability are compared to those that would exist when the consumer retains all liability. The risk averseness of the producer and the availability of commercial liability coverage are shown to affect the producer's output and safety decision. In general, a shift from consumer to producer liability might not encourage the production of safer products, either with or without the availability of commercial liability insurance to the producer.