Liability or labeling? Regulating product risks with costly consumer attention

Maria Arbatskaya and Maria Vyshnya Aslam

Journal of Economic Behavior & Organization, 2018, vol. 154, issue C, 238-252

Abstract: This paper examines the liability and labeling approaches to regulating product safety. Stronger product liability increases producer care, which then has a negative “lulling effect” on consumer attention to warning labels. By contrast, more visible warning labels increase such consumer care, which then has a positive “vigilance effect” on producer care. Information campaigns educating consumers about product risks generate a similar vigilance effect. This happens because consumers view producer care and consumer care levels as strategic substitutes, while the firm views them as strategic complements. We argue that when a public policy is chosen, the endogeneity of consumer attention to warnings is not to be overlooked.

Keywords: Warning labels; Product labeling regulation; Mandatory disclosure; Product liability; Economics of attention (search for similar items in EconPapers)
JEL-codes: D83 K13 L13 L15 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S016726811830221X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:154:y:2018:i:c:p:238-252

DOI: 10.1016/j.jebo.2018.08.016

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().