Liability and the Incentive to Obtain Information about Risk

OPPORTUNITY often exists for parties to obtain information about the risks that they create and thereby to reduce the risks. Firms may study possible product defects and be able to ameliorate them; individuals may investigate various dangers for which they are responsible and act on what they learn. The questions addressed in this article concern the incentives that the prospect of liability creates for potential injurers to obtain information about risks and whether these incentives are socially appropriate.' In the model to be considered, information is of a simple character. It reveals either that there is risk or that there is not. (For example, the test of a product reveals whether or not it has a tendency to break apart at a suspected weak point.) To determine if it is socially desirable for a party to acquire information