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Minimum Safety Standard, Consumers' Information, and Competition, The

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  • Stéphan Marette

Abstract

This paper explores the effects of a standard influencing care choice. Firm(s) may increase the probability of offering safe products by incurring a cost. Under duopoly, they compete either in prices or in quantities. Under perfect information about safety for consumers, the selected standard that corrects a safety underinvestment is always compatible with competition. Safety overinvestment only emerges under competition in quantities and relatively low values of the cost. Under imperfect information about safety for consumers, the standard leads to a monopoly situation. However, for relatively large values of the cost, a standard cannot impede the market failure coming from the lack of information.

Suggested Citation

  • Stéphan Marette, 2007. "Minimum Safety Standard, Consumers' Information, and Competition, The," Center for Agricultural and Rural Development (CARD) Publications 07-wp441, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  • Handle: RePEc:ias:cpaper:07-wp441
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    Citations

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    Cited by:

    1. Olivier Bonroy & Christos Constantatos, 2015. "On the Economics of Labels: How Their Introduction Affects the Functioning of Markets and the Welfare of All Participants," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(1), pages 239-259.
    2. Brishti Guha, 2017. "Moral hazard, Bertrand competition and natural monopoly," Journal of Economics, Springer, vol. 121(2), pages 153-171, June.
    3. repec:ebl:ecbull:v:12:y:2008:i:2:p:1-7 is not listed on IDEAS
    4. repec:kap:regeco:v:53:y:2018:i:1:d:10.1007_s11149-017-9346-6 is not listed on IDEAS
    5. Stefan Napel & Gunnar Oldehaver, 2011. "A dynamic perspective on minimum quality standards under Cournot competition," Journal of Regulatory Economics, Springer, vol. 39(1), pages 29-49, February.
    6. Bonroy, Olivier & Lemarié, Stéphane, 2012. "Downstream labeling and upstream price competition," European Economic Review, Elsevier, vol. 56(3), pages 347-360.
    7. repec:kap:regeco:v:53:y:2018:i:2:d:10.1007_s11149-017-9347-5 is not listed on IDEAS

    More about this item

    Keywords

    information; market structure; safety; standard.;

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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