Product Safety, Liability Rules and Retailer Bankruptcy: I. Introduction

Whenever the manufacturer of a potentially hazardous product does not also directly distribute it to the consumer, there exists a problem of inducing proper precautionary behavior from the retailer. Ethical drugs are dangerous unless the prescriptions are filled and the consumer informed about their use in an appropriate manner. Automobiles, power tools, and other equipment require a kind and degree of dealer service sufficient to insure they are delivered without serious defect. Electrical appliances can be deadly if the sale is not accompanied by inspections, proper installations, and education as to use. Indeed, any product which when accompanied by inadequate advice, installation, or inspection imposes...