An Economic Model for Torts in Consumer Protection

Fernando Boarato Meneguin, Maurício Soares Bugarin

Abstract


This article analyzes the effects of legislation and judicial decisions on tort liability in consumption relations. In consumer protection, if there is a failure to enforce penalties on producers, manufacturers may neglect proper care in preventing defects in products and services provided to society. After reviewing the Brazilian consumer protection legislation and literature, this paper presents an economic model, which shows that higher effective punishments induce producers to choose higher levels of precaution in the production process; however, higher punishments also reduce overall production. The trade-off between punishment, precaution and growth is an important element that should be taken into consideration in designing consumer’s protection public policy.

Keywords


Consumer Protection; Social Welfare; Law and Economics



DOI: http://dx.doi.org/10.18836/2178-0587/ealr.v3n2p189-205

Economic Analysis of Law Review  -  ISSN 2178-0587

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