Consumer Preferences for Japanese Automobiles

This paper investigates the relationship of automobile attributes and household characteristics to consumer preferences for Japanese cars. The analysis was confined to households that purchased new cars in 1986 and employed two-stage probit analysis. Results indicate that the coefficients of five automobile quality attributes are statistically significant while the coefficients of most household characteristics are not significant. Households interested in more fuel efficient and heavier cars as well as cars with lower depreciation rates and a lower frequency of repair are more likely to buy Japanese than non-Japanese cars. The fact that households buy Japanese automobiles because of quality considerations not because they are small has implications for the U.S. automobile industry which faces increased competition in a global economy.     

The Economics of the Pinto Recall

Cost-benefit analysis is applied to an evaluation of two strategies for reducing risk from pre-1977 model year Pintos. The first strategy is a design modification which might have been undertaken by Ford in 1970 when the Pinto was first produced. The second strategy is the recall which was undertaken by Ford in 1978. The analyses of the two strategies were based on the costs of strategy implementation and the benefits from the reduction in accidents involving pre-1977 model year Pintos. The results indicated that the recall strategy was more cost-ineffective than the design modification strategy. Consideration was also given to a third risk response strategy which included no corrective action.     

Risk Regulation and Consumer Welfare

Health and safety have become major consumer concerns in the 1980s. Major issues focus on who should decide for whom what level of safety and health is appropriate. This paper examines the role of consumers and government in reducing risk. Consideration is given to consumer risk perception and risk response, the need for government intervention, and the various risk evaluation procedures that might be used by government agencies to develop appropriate risk management strategies.     

An Approach to Adjusting Analysts' Consensus Forecasts for Selection Bias*

Many recent empirical studies have concluded that analysts' earnings forecasts are optimistic on average. In this paper, we attempt to undo the effect of one potential source of optimistic bias in analysts' earnings forecasts. Assuming forecasts come from a truncated normal distribution, we estimate the “true” population mean using maximum likelihood. We find that our estimates of earnings are more accurate and less biased than standard measures of sample mean and median. However, we do not find a closer relationship between excess market returns and forecast errors from our maximum likelihood estimate than from the sample mean. This may suggest that the market does not fully incorporate analysts' incentives in generating expectations about future earnings.     

Cost of Protection of the U. S. Wool Sector

The present system of protection of the U. S. wool sector affords an opportunity for examining the interdependence of intermediate and final goods sectors when both are protected. It also illustrates the cumulative nature of protective devices.
In this study an intermediate good model is employed to investigate the cost to the United States of maintaining the present method of protection for raw wool and wool products¹. The concept of a net tariff is utilized to represent the actual protection afforded to a final good when its inputs are also protected. This net tariff is related to the effective protective rate which has been frequently mentioned in the literature. It is, however, more useful when the question of cost allocation between sectors is under consideration. The intermediate good model also permits an estimation of the gain from the removal of protection in either the raw wool or wool products sector as well as an estimation of the gain from adopting alternative methods of protection such as deficiency payments.     

Risk-Benefit Analysis of Cigarette Smoking: Public Policy Implications

The objective of this study is to investigate the internal risks and benefits from smoking over the lifetime of a male individual. It differs from many earlier studies in that it focuses on the costs borne by the individual, as opposed to external or societal costs. It also includes the benefits from smoking which play an important role in the individual's smoking decision. Risk-benefit ratios range from 0.25 to 3.67 depending on the tar and nicotine content of cigarettes, the discount or time preference rate, the value of a life year, and the price elasticity of demand for cigarettes.     

Risk-Benefit Analysis and the Determination of Acceptable Risk

This paper investigates the role of risk-benefit analysis in assessing the risk associated with a variety of consumption activities. The issue of prevailing risk is of particular importance to public policy makers who must decide what level of risk requires intervention. Risk-benefit analysis may be used in three major ways: 1) determination of the level of risk to which consumers are exposed, 2) ranking of consumption activities with respect to risk, and 3) determination of consumption activities which should be addressed by risk reduction strategies. The results of the study indicate that considerable variations exist with respect to the risk levels associated with various consumption activities. The study results also suggest that there may be a need for further government intervention in some high risk areas.