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« Bottled Water | Main | What Should Students Know about Economics? »

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KipEsquire

Not to mention Underwriters Laboratories, Good Housekeeping, Consumer Reports -- and moving from safety to general quality: Zagats, TripAdvisor, Netflix, etc.

All of which are strictly private.

Phil

That's a good point. Target etc. probably doesn't have a comparative advantage in testing products, but the private firms you mention can certainly do it for them.

Ed Vielmetti

There's a toy safety news site at

http://safertoys.org

which is where I found this site.

One thing that gets in the way of mass sharing of information about toy safety is the typically skimpy labels on toys. The plush pineapple I'm looking at right now doesn't even have a model number or SKU or part number or ID or anything on it, just a "distributed by" name. No way for me to look it up anywhere - or even to reorder it if it was a favorite toy that was dog-chewed needing replacement.

Barry Payne

After years of drivers in collisions getting shredded to pieces flying through windshields, seat belts became a regulated requirement. After kicking and screaming that the cost of seat belts would put them out of business, car makers have bragged since how safe their cars are, which became a sub-industry in itself.

It didn't start with car drivers. It started with information provided by consumer advocates to car drivers. Transaction costs of understanding danger and safety were reduced. Better decisions were made by rational car buyers and drivers.

If toy makers could get away with it, they'd never make any recalls. One reason they're so responsive is because of trusted watchdog agencies that know the statistics well on these matters and have become the go-to source for the round of public panics seen with these issues.

The general effect is easily explained by game theory. No one wants to appear oblivious to potentially dangerous toys and especially to be collared in public by regulators. They end up doing voluntarily what regulation would have mandated.

Given the problem was one that would have been corrected by an efficient market, the outcome simulates the same.

In some cases it can be demonstrated they prefer regulators to step in because they are stuck in a costly stalemate. For example, when two cigarette companies in a duopoly were spending large amounts of marketing and advertising against each other, they were relieved when it was banned. Both ended up with the same market share for much less cost.

Therefore it is not at all clear that the claimed sequence of events is always flawed regulation followed by market inefficiency. It can easily be the reverse and depends on the situation.

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