Product and Stock Market Responses to Automotive Product Liability Verdicts

Abstract

CLAIMS ABOUT DETRIMENTAL economic effects of product liability are a cornerstone of efforts by tort reformers to rally support. It seems fair to say, however, that existing evidence about economic effects of product liability is sketchy. ' In this paper, we attempt to develop information about a narrow but important piece of a very complex puzzle. In particular, we develop quantitative evidence about a component of automobile manufacturers' incentives stemming from product liability by examining effects of trial verdicts on company stock prices and on new vehicle sales. We know of no similar study.2