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Product Safety Provision and Consumers' Information

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  • Marette, Stephan
  • Bureau, Jean-Christophe
  • Gozlan, Estelle

Abstract

Economic mechanisms related to the provision of product safety are explored, with particular attention paid to the structure of consumers' information. The case of perfect information, of experience goods (for which consumers detect product safety after consumption) and of credence goods (where consumers cannot link a disease to a particular product consumed in the past) are explored. Imperfect competition is assumed in the supply sector. In the case of both perfect information and experience goods, market equilibrium is characterised by a less-than-socially optimal provision of safety, when the safety effort is costly. With credence goods, imperfect information leads to the absence of safety effort and to a market closure. Different types of public regulation aiming at increasing consumer protection and circumventing market failures are explored. Particular attention is paid to minimum safety standards, labels and liability enforcement. The relative efficiency of these instruments depends on the information structure. In the cases of perfect information and experience goods, a minimum safety standard can be an efficient instrument. Regulation is necessary but not sufficient to avoid market failure in the case of credence goods. Copyright 2000 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Australian Economic Papers.

Volume (Year): 39 (2000)
Issue (Month): 4 (December)
Pages: 426-41

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Handle: RePEc:bla:ausecp:v:39:y:2000:i:4:p:426-41

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0004-900X

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Cited by:
  1. Anania, Giovanni & Nistico, Rosanna, 2003. "Public Regulation As A Substitute For Trust In Quality Food Markets. What If The Trust Substitute Cannot Be Fully Trusted?," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25924, International Association of Agricultural Economists.
  2. Stéphan Marette, 2007. "Minimum safety standard, consumers’ information and competition," Journal of Regulatory Economics, Springer, vol. 32(3), pages 259-285, December.
  3. Florian Baumann & Tim Friehe, 2010. "Product liability and the virtues of asymmetric information," Journal of Economics, Springer, vol. 100(1), pages 19-32, May.
  4. Bonroy, O. & Constantatos, C., 2007. "On the use of labels in credence goods markets," Working Papers 200709, Grenoble Applied Economics Laboratory (GAEL).
  5. Saak, Alexander E., 2003. "Identity Preservation And False Non-Gmo Labeling In The Food Supply Chain," 2003 Annual meeting, July 27-30, Montreal, Canada 22182, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. Roe, Brian E. & Sheldon, Ian M., 2001. "The Impacts of Labeling on the Production and Trade of Vertically Differentiated Goods with Process Attributes," 2001 Annual meeting, August 5-8, Chicago, IL 20451, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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