Postprint version. Published in International Review of Law and Economics, Volume 20, Issue 2, June 1, 2000, pages 269-283. Copyright © 2000 Elsevier Inc. All rights reserved. The definitive version is available at http://dx.doi.org/10.1016/S0144-8188(00)00029-6.
NOTE: At the time of publication, the author Stephen Hamilton was not yet affiliated with Cal Poly.
The article characterizes the entry incentives provided by increases in product liability under various forms of competition. It is demonstrated that the entry of small, high-cost firms is likely to occur in imperfectly competitive markets when the average damage increases with industry output. Special cases are considered, including Cournot–Nash oligopoly and dominant firm-competitive fringe.