TY  - GEN
AB  - This paper addresses the role of product liability for the emergence and development
of smart products such as autonomous vehicles (AVs). We analyze how the
liability regime affects innovative activities, as well as the timing of market introduction
and market penetration of such smart products. We develop a dynamic
model in which at each point in time, a potential (monopolistic) innovator decides
on how much to invest in the safety stock of the smart product and on the product
price, once it has been launched. Calibrating the model to the U.S. car market, our
analysis reveals policy-relevant trade-offs when shifting more liability on the producers
of AVs. First, while this improves the safety of AVs in the long run, the safety
stock is accumulated more slowly. Second, it delays the market introduction of AVs,
and also slows down market penetration, which hampers the innovator’s incentives
for safety investments in the short- and intermediate term. As a result, the safety
level of AVs at a given point in time decreases as the liability regime becomes more
stringent. Furthermore, there is a threshold for the innovator’s burden of liability
beyond which she forgoes to develop the AV altogether. Finally, we find that direct
AV safety regulation is welfare-superior compared to a stringent liability regime, as
it induces higher levels of AV safety in the short and intermediate term.
DA  - 2019
DO  - 10.4119/unibi/2935700
KW  - Product Innovation
KW  - Liability
KW  - Digital Economy
KW  - Autonomous Vehicles
KW  - Smart Products
KW  - Optimal Investment Dynamics
KW  - etace_WP
LA  - eng
PY  - 2019
SN  - 2196-2723
TI  - Smart Products: Liability, Timing of Market Introduction, and Investments in Product Safety
UR  - https://nbn-resolving.org/urn:nbn:de:0070-pub-29357007
Y2  - 2024-11-22T03:27:00
ER  -