The John M. Olin Center

Paper Abstract

304. W. Kip Viscusi, Corporate Risk Analysis: A Reckless Act?, 11/2000; subsequently published in Stanford Law Review, Vol. 52, No. 3, February 2000, 547-597.

Abstract: Product safety decisions should reflect appropriate risk-cost balancing. In much the same way government agencies use forms of risk assessment and benefit-cost analysis in setting regulatory standards, corporations likewise should base product safety decisions on systematic assessments of the competing concerns. This paper reports original evidence on the attitude of almost 500 jury eligible citizens who considered cases involving risk and analysis components. Systematic analyses of risk and cost tradeoffs boost the frequency of punitive damages awards. Even more striking is that as the company increases the value it places on safety, jurors use this value as an anchor and boost the punitive damages sanction. These findings are reflective of the kinds of behavior in recent punitive damages cases, including the $4.8 billion punitive damages award against GM in 1999.

304: PDF