This paper studies a monopoly firm with the ability to conduct costly premarket testing of its product in order to predict how safe this product is to consume. While there are private incentives to test, the amount of testing effort supplied by a monopolist need not be optimal. In a model which...

In this paper, the authors examine the problem of inducing a manager to acquire information that is useful in determining his optimal job assignment but which might also adversel y affect his market value. The authors show that spot contracts are optimal and generate the first-best effort level...

This paper presents a model of involuntary product recall in which a firm has private information on its ability to produce safety. The ex post regulation of safety is motivated through a parametric imperfection in the product liability system which results in a firm under internalizing expected...

In this paper, we consider the problem of setting minimum safety standards for observable safety characteristics and the proper amount of effort in the production of safety for a product which has some unobservable safety attributes. We formulate a second-best optimum for a regulator, examine...

In safety and environmental regulation, economists have preached the virtues of performance standards as opposed to equipment specification as the proper instruments of control. This prescription is made in the context of actual situations where the firm's product safety or environmental impact...

The indirect regulation of product safety design through pre-market testing is common with pharmaceuticals and other products containing chemical ingredients. We model this problem as a three stage game in which the firm begins by designing safety, next the government supervises a testing...

This paper compares the regulation of safety performance standards with the regulation of specific safety equipment. It is well known that if information is perfect, it is more efficient to regulate performance than to regulate specific equipment. The former mechanism fosters cost minimization,...