The Minimum Safety Standard, Consumers’ Information, and Competition, February 2007

(2007) The Minimum Safety Standard, Consumers’ Information, and Competition, February 2007. Iowa State University

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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 over investment 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.

Item Type: Departmental Report
Keywords: information, market structure, safety, standard
Subjects: Business and industry > Economic forecasts
Business and industry > Trade and commerce
Public Safety and consumer protection
Public Safety and consumer protection > Product safety
ID Code: 4932
Deposited By: Margaret Barr
Deposited On: 03 Apr 2007
Last Modified: 03 Apr 2007
URI: http://publications.iowa.gov/id/eprint/4932

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