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19 download_doc-27.php - o Regulate consumer and worker...

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G202 (4/22/2009) Topic 9: Quality Regulation and Asymmetric Information o REQUIRED READINGS:      “The Nike Case” o Online Nike Case Discussion: April 26 th —April 28 th   o In-class Nike Case Debriefing: April 29 th   Uninformed Demand Example  o Used Cars:      Performance problems with the cars are not revealed to potential  consumers.  Consumers pay too much for the products. From the view of efficiency too much is consumed Uninformed Supply Example  o Worker Safety:      Health risks from producing butter-flavored micro-wave popcorn  are not revealed to workers. Workers will be under-compensated. From the view of efficiency too much labor is supplied Role for Government
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Unformatted text preview: o Regulate consumer and worker safety (quality). Example: The FTC Shuts down Miss Cleo for false promise of free psychic readings, abusive tele-marketing, and tricky billing tactics! Average FREE call costs more than $60 o How much regulation is efficient? Individuals benefit from ensuring safety in consumer products and working conditions. However, each level of safety is costly to obtain. o So, is it efficient to obtain 100% safety? No, it is efficient to enact only the regulations that are more beneficial than costly Regulate to the point where MB = MC Efficient Amount of Safety...
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This note was uploaded on 04/18/2011 for the course BUS 202 taught by Professor Kreft during the Winter '09 term at Indiana.

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19 download_doc-27.php - o Regulate consumer and worker...

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