Auto Safety Regulation: An Analysis of Market Failure
AbstractAlthough a number of studies have shown seat belts to be highly effective in the prevention of death and injuries, they are used by less than 20% of automobile occupants. This low utilization has led to the present regulation that beginning in 1982 new cars must be equipped with a passive restraint system (i.e., either automatic seat belts or air cushions). This paper examines the potential sources of market failure in this situation (information imperfections and market externalities) and performs a cost-benefit analysis of the mandatory passive restraint regulation. A major finding is very high benefit-cost ratios from the substitution of passive for manual seat belts but much more mixed results in the case of air cushions.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal Bell Journal of Economics.
Volume (Year): 12 (1981)
Issue (Month): 1 (Spring)
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- Christine Jolls, 2007. "Behavioral Law and Economics," NBER Working Papers 12879, National Bureau of Economic Research, Inc.
- Viscusi, W Kip, 1993. "The Value of Risks to Life and Health," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1912-46, December.
- Justina A.V. Fischer, 2005. "The Impact of Direct Democracy on Crime: Is the Median Voter Boundedly Rational?," University of St. Gallen Department of Economics working paper series 2005 2005-14, Department of Economics, University of St. Gallen.
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