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Regulation of Product Safety Characteristics under Imperfect Observability

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  • Chan, Yuk-Shee
  • Marino, Anthony M

Abstract

In this paper, we consider the problem of setting minimum safety standards for observable safety characteristics and the proper amount of effort in the production of safety for a product which has some unobservable safety attributes. We formulate a second-best optimum for a regulator, examine the interplay between safety effort and a minimum safety standard, and study how the internalization of excess costs or benefits by a self-interested regulator affects the minimum safety standard and the safety effort level. Finally, we present two examples using a utility function which is widely used in the law and economics literature. Copyright 1994 by Kluwer Academic Publishers

Suggested Citation

  • Chan, Yuk-Shee & Marino, Anthony M, 1994. "Regulation of Product Safety Characteristics under Imperfect Observability," Journal of Regulatory Economics, Springer, vol. 6(2), pages 177-195, May.
  • Handle: RePEc:kap:regeco:v:6:y:1994:i:2:p:177-95
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    Cited by:

    1. Stéphan Marette, 2007. "Minimum safety standard, consumers’ information and competition," Journal of Regulatory Economics, Springer, vol. 32(3), pages 259-285, December.

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