Market Structure, Information and Litigation with Application to Product Safety and Environmental Quality

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The objective of this project is to integrate models of various aspects of the legal system with oligopoly models in order to obtain a more complete description of how various features of the firms' economic and legal environment influence their decision- making with respect to product quality, safety and environmental quality. In particular, four features of the economic and legal environment will be examined: (1) market structure in the product market; (2) who benefits and who is potentially harmed by the production and use of the product; (3) legal rules which influence the outcome of settlement negotiations and/or trial in the event of harm; and (4) the impact of asymmetric information among participants in the product's development, testing, sale and use, and among potential litigants in the event that the product causes harm. The methods to be used include applied game theory and information economics. Intended applications include products such as therapeutic drugs with potential side effects and by-product problems such as chemical "runoff" (e.g., herbicides/pesticides, acid rain and ozone depletion) with the potential for generalized toxic effects on the environment and on third parties.