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- Title
Consumer Misperceptions, Product Failure and Producer Liability.
- Authors
Spence, Michael
- Abstract
This paper is concerned with products that have probabilistic characteristics like safety and durability, with the sources of failure in markets where such products are sold, and with regulatory intervention in these markets. The mere fact that products may fail or cause accidents is not by itself an argument for intervention in the market. But because of the random character of the outcome, there is a suspicion that consumers are not accurately informed about the distribution of possible outcomes prior to purchase. A product should be thought of as a bundle of characteristics: a price, a distribution over the space of possible product failures, and an insurance policy. Guarantees are a form of insurance against product failure. To be misinformed about the probabilities of product failure, is to be misinformed about the product.
- Subjects
CONSUMER preferences; MARKETS; CONSUMER goods; MARKET equilibrium; COMMERCE; ECONOMICS; MICROECONOMICS; LEGAL liability
- Publication
Review of Economic Studies, 1977, Vol 44, Issue 3, p561
- ISSN
0034-6527
- Publication type
Article
- DOI
10.2307/2296908