SECRECY AND SAFETY by Andrew
نویسندگان
چکیده
We employ a simple two-period model to show that the use of confidential settlement as a strategy for a firm facing tort litigation leads to lower average product safety than that which would be produced if a firm were committed to openness. Moreover, confidentiality can even lead to declining average product safety over time. We also show that a rational risk-neutral consumer’s response to a market environment, wherein a firm engages in confidential settlement agreements, may be to reduce demand. We discuss how firm profitability is influenced by the decision to have open or confidential settlements; all else equal, a firm following a policy of openness will pay higher equilibrium wages and incur higher training costs, though product demand will not be diminished (as it may be for a firm employing confidentiality). Further, we characterize the choice of regime, providing conditions such that, if the cost of credible auditing (to verify openness) is low enough, a firm will choose to pay for auditing and eschew confidentiality.
منابع مشابه
Safety versus Secrecy (invited Paper)
Safety and secrecy are formulated for a deterministic programming language. A safety property is deened as a set of program traces and secrecy is deened as a binary relation on traces, characterizing a form of Noninterference. Safety properties may have sound and complete execution monitors whereas secrecy has no such monitor.
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