The Minimum Safety Standard, Consumers' Information, and Competition

Stephan Marette

No 18429, Hebrew University of Jerusalem Archive from Hebrew University of Jerusalem

Abstract: This paper explores the effects of a standard influencing care choice. Firm(s) may increase the probability of offering safe products by incurring a cost. Under duopoly, they compete either in prices or in quantities. Under perfect information about safety for consumers, the selected standard that corrects a safety underinvestment is always compatible with competition. Safety overinvestment only emerges under competition in quantities and relatively low values of the cost. Under imperfect information about safety for consumers, the standard leads to a monopoly situation. However, for relatively large values of the cost, a standard cannot impede the market failure coming from the lack of information.

Keywords: Consumer/Household; Economics (search for similar items in EconPapers)
Pages: 37
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ags:hebarc:18429

DOI: 10.22004/ag.econ.18429

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