ABSTRACT
This chapter examines the case for and against the minimum standards. Governments are frequently put under heavy pressure to impose compulsory minimum standards for a product, banning the sale of any item that does not meet certain minimum criteria. The compensation approach works even when there is a hidden characteristic and the manufacturer cannot identify and remove defective items. An alternative to minimum standards and guarantees is to specify a minimum standard of labelling. In effect, this legislation means that the risk is switched from the buyer to the seller. It becomes a calculable, insurable risk. Most important are consumer protection, helping producers by preventing market failure through inferior products, and helping producers get monopoly profits. Attention is drawn repeatedly to the complexity of the market, and to the fact that elasticities and cross-elasticities, short run and long run, change as a result of these changes in marketing.
