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Product Recalls, Imperfect Information, and Spillover Effects: Lessons from the Consumer Response to the 2007 Toy Recalls

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Author Info

  • Seth Freedman

    (University of Michigan and Indiana University)

  • Melissa Kearney

    (University of Maryland and NBER)

  • Mara Lederman

    (Rotman School of Management, University of Toronto)

Abstract

In 2007, the Consumer Product Safety Commission issued 212 recalls of toys and other children's products, a sizable increase from previous years. We investigate changes in toy sales following these recalls. We find that for manufacturers that had recalls, unit sales of the types of toys involved in the recall fell relative to their sales of toys in other categories. We do not find evidence of within-manufacturer spillovers to dissimilar toys. We do, however, find large industry-wide spillovers in the form of sales losses to manufacturers that did not experience any recalls. Our results shed light on how consumers may draw inferences from information about product safety. © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00162
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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 94 (2012)
Issue (Month): 2 (May)
Pages: 499-516

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Handle: RePEc:tpr:restat:v:94:y:2012:i:2:p:499-516

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Web page: http://mitpress.mit.edu/journals/

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Related research

Keywords: product recalls; toys; toy recalls; consumer response; manufacturers;

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References

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Cited by:
  1. Collins, J. Michael & Simon, Kosali I. & Tennyson, Sharon, 2013. "Drug withdrawals and the utilization of therapeutic substitutes: The case of Vioxx," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 148-168.
  2. K. Sudhir & Nathan Yang, 2014. "Exploiting the Choice-Consumption Mismatch: A New Approach to Disentangle State Dependence and Heterogeneity," Cowles Foundation Discussion Papers 2014, Cowles Foundation for Research in Economics, Yale University.

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