TY  - JOUR
AU  - Polinsky,A. Mitchell
AU  - Shavell,Steven
TI  - Mandatory Versus Voluntary Disclosure of Product Risks
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12776
PY  - 2006
Y2  - December 2006
UR  - http://www.nber.org/papers/w12776
L1  - http://www.nber.org/papers/w12776.pdf
N1  - Author contact info:
A. Mitchell Polinsky
Stanford Law School
Stanford University
Stanford, CA  94305
Tel: 650/723-0886
Fax: 650/723-3557
E-Mail: polinsky@stanford.edu

Steven Shavell
Harvard Law School
1575 Massachusetts Avenue
Hauser Hall 508
Cambridge, MA  02138
Tel: 617/495-3668
Fax: 617/496-2256
E-Mail: shavell@law.harvard.edu
AB  - We analyze a model in which firms are able to acquire information about product risks and may or may not be required to disclose this information.  We initially study the effect of disclosure rules assuming that firms are not liable for the harm caused by their products.  Although mandatory disclosure obviously is superior to voluntary disclosure given the information about product risks that firms possess -- since such information has value to consumers -- voluntary disclosure induces firms to acquire more information about product risks because they can keep silent if the information is unfavorable.  The latter effect could lead to higher social welfare under voluntary disclosure.  The same results hold if firms are liable for harm under the negligence standard of liability.  Under strict liability, however, firms are indifferent about revealing information concerning product risk, and mandatory and voluntary disclosure rules are equivalent.
ER  -