Chapter 5 Slides

Chapter 5 Slides - Chapter 5 Protection for the Consumer...

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Chapter 5 Protection for the Consumer
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Consumer Protection “For consumer protection to work, standards must be set, they must be enforced, and those who violate them must be apprehended and punished.” FTC versus Janet Jackson - children were at risk for this ad - inappropriate for children - now plays it safe- Ton Petty, Paul McCartney
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Background “Primary goal of the [consumer] movement is to advance efficiency and equity in the marketplace” (Herrmann & Mayer, pp. 584). - equity: equal - Do we have an equal marketplace? No- monopolies, people aren’t treated equally (discrimination) For economists, “efficiency” is nearly synonymous with “perfectly competitive
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Sources of Consumer Protection A. Consumers themselves Caveat emptor -- “let the buyer beware” B. Businesses Incentives? Fair marketplace Police themselves rather than be regulated Avoiding lawsuits Competition C. Other private sector Consumers Union, for example D. Government Many argue this is least preferred alternative
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Consumers Themselves
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Consumers themselves Caveat emptor -- let the buyer beware Regardless of market protections, consumers must remain savvy Need to watch out for yourself Knowing what is out there and what you are up against Market imperfections may require protections for even the most savvy consumers - try to protect yourself as best as you can
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Consumers themselves How does the buyer beware? information gathering - getting info about the product Cues of credibility. Such as seals of approval. - Example: doctors, nails specialist, restaurants, etc. all have regulated licenses or - Example: bad Mexican restaurant Sharing information with others Works pretty well in perfectly competitive market
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Perfect Market Perfect Competition (PC) –many buyers and sellers, all are price takers, not price makers. - no one decides the price, the price is just being decided by the market Perfect Information (PI) – buyers and sellers know all they need to know about what they are buying and selling to make the right decisions. - we know everything we need to know about the market Complete Markets (CM) – no externalities or public goods, no transactions costs
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Unprotected/at risk consumers… - Not everyone has access to the same things - If we did then people wouldn’t be living on the streets, etc.
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Consumer Protection Class. Whole semester on who is protecting us!!
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Chapter 5 Slides - Chapter 5 Protection for the Consumer...

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