Legal Liability

Supplier's legal liability for the deaths of consumers for products

[Name of the Insitution]Supplier's legal liability for the deaths of consumers for products

Introduction

Should the manufacturer of a product be held legally responsible if a consumer, while using the product, harms someone else? This is a question that has long vexed courts. Manufacturers might be held liable for accidental harms caused by the consumer, such as when a lawnmower ?ings a stone that hits a neighbor in the eye or when a driver of a car hits a pedestrian. Manufacturers might also be held liable if the consumer intentionally causes harm, for example, when a gun is used to commit murder. Indeed, recently many lawsuits have been brought against fire arms manufacturers for the deaths and injuries caused by criminals who use guns. Although such lawsuits have generally been unsuccessful, these issues remain hotly discussed in the legal and political arenas.

Discussion

We show that consumer liability, not manufacturer liability, is optimal when consumers have deep pockets and can pay for the harms that they cause; solvent consumers fully internalize the social risks associated with their product use. This has three desirable effects. First, consumers take the optimal degree of care when using dangerous products. Second, they demand optimal safety features in the products that they buy. Third, the equilibrium market quantity is efficient because the market price plus the consumer's expected liability reflects the true social cost of the dangerous product. On the other hand; manufacturer liability may be optimal when consumers lack the financial resources to pay for the harms they cause. In a representative-consumer setting, we show that the consumer should bear primary responsibility for the damages, while manufacturers should be held responsible for the shortfall not covered for the consumners

The Product Liability Debate

Every year, 34 million people are injured or killed as a result of product related accidents. Such injuries are the major cause of death for people between the ages of 1 and 36, outnumbering deaths from cancer or heart disease. The estimated cost of these injuries is $12 billion annually.

According to the U.S. Consumer Product Safety Commission (CPSC), there are approximately 22,000 deaths and more than 29 million injuries associated with consumer products each year. Examples of products considered as defective include industrial machines, breast implants, children's products (toys, car seats, strollers, etc.), faulty brakes, hip and joint replacements, tires, airbags and prescription drugs. Various government agencies evaluate products in terms of consumer safety. If products are found to be unreasonably dangerous, the appropriate agency works with the manufacturer to institute either a voluntary or mandatory recall

Tens of thousands of product injury lawsuits are filed each year. As the number of claims has risen, so too have the number of companies forced to file bankruptcy because of massive suits. Moreover, an increasing number of companies are claiming that they have pulled established products off the market and halted research on promising products for fear of liability.

Manufacturers claim that they are victims of a system gone ...