Product recall with symmetric uncertainty and multiunit purchases

Anthony Marino

Journal of Regulatory Economics, 2021, vol. 60, issue 1, No 1, 21 pages

Abstract: Abstract This paper considers product recall under a perfect regime of strict liability. We show that safety is under supplied given output due to an under internalization of infra-marginal units. If we add a mandatory refund with a possible penalty fee in the event that the product turns out to be unsafe, then while the price increases, there is no change in the allocation, utility, profit or total welfare. The recall procedure is then neutral. We then extend the model to examine optimal fines and minimum output taxes, endogenous proclivity to return a product, endogenous decision to sue in the event of damage and the effects of having the consumer under estimate expected damages.

Keywords: Product recall; Product refunds; Fines (search for similar items in EconPapers)
JEL-codes: L51 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11149-021-09434-3 Abstract (text/html)
Access to full text is restricted to subscribers.

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:kap:regeco:v:60:y:2021:i:1:d:10.1007_s11149-021-09434-3

Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/11149/PS2

DOI: 10.1007/s11149-021-09434-3

Access Statistics for this article

Journal of Regulatory Economics is currently edited by Menaham Spiegel

More articles in Journal of Regulatory Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().