Regulation of Product Safety Characteristics under Imperfect Observability

Yuk-Shee Chan and Anthony Marino

Journal of Regulatory Economics, 1994, vol. 6, issue 2, 177-95

Abstract: In this paper, we consider the problem of setting minimum safety standards for observable safety characteristics and the proper amount of effort in the production of safety for a product which has some unobservable safety attributes. We formulate a second-best optimum for a regulator, examine the interplay between safety effort and a minimum safety standard, and study how the internalization of excess costs or benefits by a self-interested regulator affects the minimum safety standard and the safety effort level. Finally, we present two examples using a utility function which is widely used in the law and economics literature. Copyright 1994 by Kluwer Academic Publishers

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:kap:regeco:v:6:y:1994:i:2:p:177-95

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