On the 13th of April, Elisabeth Schulte (Marburg University) presents her work on "Product Liability, Harm Level Correlation, and Incentives to Acquire and Disclose Product Risk Information" in Q3.245.
She will be available for conversations to interested faculty members in the morning and early afternoon. Please contact wendelin.schnedler@uni-paderborn.de in this case.
Here is the abstract:
We investigate a firm's incentives to disclose product risk information, considering the interplay of liability, inter-firm harm correlation, and competition. Under strict liability with full consumer compensation, the firm's disclosure does not directly impact consumer outcomes and hinges on risk correlation: low product risk is revealed if the correlation is weak, but high risk is revealed if it is strong. Under a no-liability regime, where consumers rely heavily on the firm's disclosure, the firm discloses low product risk and conceals high product risk, regardless of the correlation. We compare the firm's incentives to acquire product-risk information in mandatory and voluntary disclosure regimes. Strategic concealment under voluntary disclosure creates an opacity feedback: when information acquisition effort is observable, a change in the effort alters how the market interprets silence, which can reduce acquisition incentives and dominate the option value of strategic revelation, overturning the standard ranking between disclosure regimes.
