Citation

Muehlhause CO. J. Res. Natl. Bur. Stand. (1977) 1978; 83(5): 459-483.

Copyright

(Copyright © 1978, U.S. Dept. of Commerce, National Institute of Standards)

DOI

10.6028/jres.083.032

PMID

34566000

Abstract

The effect of a mandated consumer product safety standard on the net public benefit is expressed in terms of the difference between two well characterized market states (pre- and post-standard), each of which is assumed to be in static equilibrium. The analysis is facilitated by treating the post-standard state as one which can be "derived" from the pre-standard state by 1) expanding the production cost and demand functions around their initial market values and 2) introducing modifications in the production cost function required for compliance with the standard. A gain in net benefit would imply that promulgation of the standard is favorable; however, a variety of uncertainties are encountered in estimating the incremental changes in production, demand, compliance, and regulatory costs. These are discussed, some of the simpler situations which may prevail are disclosed, and the sources of expertise required to effect the analysis are identified. The detailed portion of the analysis undertaken in this paper is one which attempts to derive a market factor such that when it is multiplied by the basic increment in manufacturing cost necessary to comply with the standard yields the loss in net benefit due to the market system. The results are then applied to a case involving the manufacturing and retailing of upholstered furniture, which industries may be subject to a certain fire prevention standard.

Language: en

Keywords

Consumer; cost-benefit; fire hazard; market; regulation safety standards; upholstered furniture