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| Author: | Iossa, E. Palumbo, G. |
| Title: | Over-optimism and lender liability in the consumer credit market |
| Journal: | Oxford Economic Papers
2010 : APR, VOL. 62:2, p. 374-394 |
| Index terms: | credit markets liability consumers consumer goods purchasing selling |
| Language: | eng |
| Abstract: | Credit purchases of consumer goods are usually made on terms based on an agreement btw. the seller and the lender. The puzzle addressed in this paper is the issue that in this type of purchase the lender should be jointly liable with the seller for breach of sale contract by the seller. The rationale for this principle is explored in situations with market failure arising due to consumers underestimating the risk of product failure, e.g. due to seller misrepresentation, and it is difficult to enforce seller responsibility (here as: resp). It is shown that joint resp. increases welfare, reducing the incentives of sellers to misrepresent their products' quality. |
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