Product Recalls, Imperfect Information, and Spillover Effects: Lessons from the Consumer Response to the 2007 Toy Recalls

Seth Freedman; Melissa S. Kearney; Mara Lederman

doi:10.1162/rest_a_00162

Product Recalls, Imperfect Information, and Spillover Effects: Lessons from the Consumer Response to the 2007 Toy Recalls

Seth Freedman^1,2,3; Melissa S. Kearney^4,5; Mara Lederman⁶

¹ University of Michigan–Ann Arbor · ² Indiana University Bloomington · ³ Indiana University · ⁴ National Bureau of Economic Research · ⁵ University of Maryland, College Park · ⁶ University of Toronto

The Review of Economics and Statistics 2012

In 2007, the Consumer Product Safety Commission issued 212 recalls of toys and other children's products, a sizable increase from previous years. We investigate changes in toy sales following these recalls. We find that for manufacturers that had recalls, unit sales of the types of toys involved in the recall fell relative to their sales of toys in other categories. We do not find evidence of within-manufacturer spillovers to dissimilar toys. We do, however, find large industry-wide spillovers in the form of sales losses to manufacturers that did not experience any recalls. Our results shed light on how consumers may draw inferences from information about product safety.

DOI: 10.1162/rest_a_00162
Volume: 94 (2)
Pages: 499-516
Language: en
Export: BibTeX
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