Secrecy and safety

• 成果类型: Article
• 署名作者: Daughety, AF; Reinganum, JF
• 署名单位: Vanderbilt University
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/0002828054825673
• 发表日期: 2005
• 页码: 1074-1091
• 关键词: advertising signals; PUBLIC-ACCESS; price; QUALITY; CONFIDENTIALITY; LITIGATION; liability

摘要

We provide a model showing that the use of confidential settlement as a strategy for a firm facing tort litigation leads to lower average safety of products sold than would occur if the firm were committed to openness. A rational risk-neutral consumer's response in a market, wherein a firm engages in confidential settlements, may be to reduce demand. A firm committed to openness incurs higher liability and R&D costs, though product demand is not diminished. We identify conditions such that, if the cost of credible auditing (to verify openness) is low enough, a firm prefers to eschew confidentiality.