CONSUMER PRODUCT MARKET FAILURES AND THE ROLE OF THE CONSUMER PRODUCT SAFETY COMMISSION

Abstract

ABSTRACT The aim of this article is to elaborate on consumer product market failures. Most economists believe market failures occur due to existence of imperfect information, market power, transaction costs, externalities, and asymmetric information. The CPSC mitigates problems arising from imperfect information, transaction costs, externalities, and asymmetric information without supplanting the markets. By centralizing the product hazard identification and reduction process, the CPSC minimizes transaction costs, accounts for benefits of product safety not internalized by consumers and producers, eliminates informational asymmetries among consumers and producers, and provides for contingencies not specified in contractual relationships between consumers and producers. These efforts enable more consumers and producers to participate in markets. Keywords Consumer product market failure, imperfect information, market power, transaction costs, externalities, and asymmetric information.