Market failure can have serious negative consequences on human welfare, including various health risks to people. How to best correct market failure becomes an important question. Different approaches may reduce market failure, such as direct government regulation, or market based approaches. This research explores consumers’ or societies’ reactions to market failure and approaches to reduce market failure.
The first study uses a random utility model and a choice experiment method to estimate Chinese parents’ marginal willingness-to-pay for potential policy changes that target overall food safety. Results suggest that a policy that provides both direct government regulation and information to create incentives for market solutions can obtain more financial support and be supported by a larger share of respondents.
The second study explores money-risk tradeoffs when risks are due to information asymmetry. The data suggest that a majority of respondents prefer a brand that is more expensive and perceived to be safer compared to a brand that is cheaper and perceived to be less safe. Respondents’ choices may be influenced by how they weigh the concern of inconsistency between price and safety and health concerns, as well as the relative magnitude of the price difference and perceived safety difference between the two brands.
The last study develops a dynamic model of resource extraction and pollution emissions between two agents under a cap-and-trade system, using general functional forms. It explores the tradeoff between the use of pollution reduction technology and the purchase of emissions permits, the relationship between resource extraction and pollution emissions, and the interaction between two agents. Possible optimal time path of resource extraction and pollution emissions are also discussed.
Level of Degree
Department of Economics
First Committee Member (Chair)
Janie Chermak (co-chairs)
Second Committee Member
Jennifer Thacher (co-chairs)
Third Committee Member
Fourth Committee Member
Market Failure, Choice Experiment, Dynamic Game, Money-Risk Trade-off, Risk Aversion, Policy
Cheng, Yingzhe. "REACTIONS TO MARKET FAILURE AND APPROACHES TO REDUCE MARKET FAILURE." (2017). http://digitalrepository.unm.edu/econ_etds/75