CONSUMERS AND PRODUCT SAFETY: MARKET PROCESSES AND IMPERFECTIONS*

Hal Sider and Eugene Smolensky

Review of Policy Research, 1983, vol. 2, issue 3, 527-536

Abstract: This paper reexamines the competitive market solution to the determination of product safety. The concept of an optimizing social level of product safety‐defined at the point at which the costs of increasing safety are equated to consumers willingness to pay for it‐is developed and discussed. Various potential market failures are outlined. These failures give reasons to expect that the competitive solution will not be achieved in practice and provide a rationale for certain types of governmental intervention. Various empirical studies of implicit markets for various types of risks are reviewed as a basis for evaluating market efficiency and regulatory efficiency.

Date: 1983
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https://doi.org/10.1111/j.1541-1338.1983.tb00738.x

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