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Products Liability, Corporate Structure and Bankruptcy: Toxic Substances and the Remote Risk Relationship

Schwartz, Alan (1984) Products Liability, Corporate Structure and Bankruptcy: Toxic Substances and the Remote Risk Relationship. Social Science Working Paper, 542. California Institute of Technology , Pasadena, CA. (Unpublished)

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This paper first develops criteria by which courts can distinguish between product related risks that profit maximizing firms can and cannot be expected to discover. It then argues that imposing the former--"knowable"--set of risks on firms reduces accident costs and creates no problems that corporate and bankruptcy law cannot adequately solve. In contrast, imposing the latter--"remote"—set of risks has no effect on reducing accident costs and tends to produce unsolvable problems of the kind that characterize the current asbestos cases. The paper concludes by arguing that courts are wrong to create these problems because the victims of remote risks lack a tenable distributional or moral claim to have private firms reimburse them.

Item Type:Report or Paper (Discussion Paper)
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Additional Information:This paper was improved by helpful comments made at a U. S. C. Law Center Faculty Workshop and a seminar concerning toxic risks held at the California Institute of Technology. The paper also benefited substantially from conversations with Kim Border and Jennifer Reinganum and from comments on prior drafts by Robert Bone, Jules Coleman, Richard Craswell, Thomas Jackson, Will Jones, Stephen Horse, George Priest, Steven Shavell, Gary Schwartz, Matthew Spitzer and James Strnad. Published as Schwartz, Alan. "Products liability, corporate structure, and bankruptcy: toxic substances and the remote risk relationship." The Journal of Legal Studies 14.3 (1985): 689-736.
Group:Social Science Working Papers
Subject Keywords:Financial risk, Business structures, Business risks, Limited liability, Liability insurance, Bankruptcy Code, Asbestos, Torts, Warnings, Accidents
Series Name:Social Science Working Paper
Issue or Number:542
Record Number:CaltechAUTHORS:20170918-164344186
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:81553
Deposited By: Jacquelyn Bussone
Deposited On:19 Sep 2017 16:24
Last Modified:03 Oct 2019 18:44

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