All-Terrain Vehicles: Market Reaction to Risk Information

Gregory B Rodgers

Economic Inquiry, 1993, vol. 31, issue 1, pages 29-38

Abstract: This article examines the market response to new risk information implicit in a recent regulatory stop-sale of new three-wheeled all-terrain vehicles. A hedonic price analysis is used to quantify the stop-sale's impact in the secondhand market, a market segment not directly affected by the stop-sale. The analysis shows a substantial reduction in the price of three-wheeled all-terrain vehicles relative to the price of less risky models. This result is consistent with rational economic behavior and suggests that providing new risk information can improve market efficiency. Copyright 1993 by Oxford University Press.

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