The Economics of Product Safety: A Rejoinder
Volume: Volume 5, No. 2
Issue: Autumn 1974
Pages: pp. 689-695
Authors: Walter Y. Oi
Title: The Economics of Product Safety: A Rejoinder
Abstract: The model of the demand for a risky product (in the Spring 1973 issue of this Journal) has been criticized because it assumed perfect information. Goldberg contends that the implications of that model are wholly irrelevant for a world of imperfectly informed consumers. He further asserts that the model is incapable of relaxing the full information assumption. In this rejoinder, I first restate the salient features of the earlier model. The minimization of the sum of accident costs and accident prevention costs is surely the appropriate goal for public policy toward product safety, but this goal is largely ignored in Goldberg's comment. Contrary to his assertion, I show my model can easily be modified to analyze the implications of imperfect information within the context of product risks that can be described by one parameter. Some remarks are also offered on the costs and benefits of product bans as well as on directions for further research.
JEL Classification
Consumer Protection (9213)
Welfare Theory General (0240)