The Ethics Of Market Production And Marketing

Injuries from auto related accident averaged 56,270 each week, death averaged 117 per day and financial loses estimated $479 million. 500,000 people were injured due to use of toy, nursery equipment, and playground tool. 300,000 people required treatment for injuries involving home construction materials.

 Free and competitive market can help decrease in injuries. Neither government nor business personal can control.

Free markets promote allocation, use and distribution of goods in a certain sense, respectful of rights, maximum utility maximize and sovereign.

 Consumer safety is seen as a good that is most efficiently provided through the mechanism of the free market.

Seller must respond to the demand of consumer.

Seller must provide the product to the consumer according to the demand and value given to safety by customer otherwise they risk losing customers to competitors who cater to the preferences of consumers. No government and business personal interferes.

Critics to the market approach respond that the benefits of free markets are obtained only when the markets have all of the seven defining characteristics:
a. There are numerous buyers and sellers. b. Everyone can freely enter and exit the market. c. Everyone has full and perfect information.

a. All goods in the market are exactly similar. b. There are no external costs. c. All buyers and sellers are rational utility maximizers.

a. The market is unregulated.

Critics of the market approach to consumer issues argue that these characteristics are absent in consumer markets.

 Many product are too complex for consumer to understand. Markets cannot provide consumer with product information.

Solution to this problem is consumers union.

Free riders.

 Few people are good are at estimating probabilities. People are irrational and inconsistent when weighing choices. Many consumers markets are monopolies and oligopolistic.

 It is clear responsibility rest on consumers. Care less in use of products Use tools and instrument that they dont have skills and knowledge. Injuries also arises from flaw in product design.

About 50 percent of the products in Pakistan are either substandard, adulterated or counterfeit that have flooded the markets and the consumers are being cheated due to the absence of consumer protection laws and lack of enforcement of existing food and drug laws.

There are only three active consumer protection organizations are working in Pakistan, compared to India where 5,000 such organizations are operating.

 Helpline Trust chairman, A Hamid Maker, said that in Pakistan, the worst enemies of the consumers are the consumers themselves, as they refuse to exercise their rights and purchase products and accept services without checking price or quality. Citing the example he said that there are over 300 brands of cooking oil and bottled water available in the markets in various sizes of tins, bottles and plastic cans, but only nine cooking oil and 22 banaspati manufacturers, 36 water bottlers, one biscuit manufacturer, and only one carbonated drinks manufacturer were registered with Pakistan Standards And Quality Control Authority (PSQCA).

 Contract View Due Care View Social Costs View

The view that the relationship between a business firm and its consumers is essentially a contractual relationship and the firms moral duties to the customer are those created by this contractual relationship.

 Duty to comply Duty of Disclosure Duty Not to Misrepresent Duty not to Coerce

Duty To Comply

The basic moral duty that a business firm owes its customers (under contract view) is the duty to provide consumers with a product that lives up to those claims that the firms expressly made about the product which led the customers to enter the contract freely

Duty To Comply
Eg. Winthrop Laboratories - marketed a painkiller that it advertised as non addictive. A patient using the painkiller became addicted to it and died of overdose Court found Winthrop liable for the patients death because although it had expressly stated that the drug as non addictive. Winthrop Labs had failed to live up to its duty to comply with this express contractual claim

 Reliability service life

maintainability
safety

THE DUTY OF DISCLOSURE

An agreement is not binding unless both parties to the agreement knows what they are doing and freely choose to do it. The seller has a duty to disclose exactly what the customer is buying and what the terms of the sale are. The seller has a duty to inform the buyer of any characteristics of the product that could affect the customers decision to purchase the product

The Duty Not To Misrepresent

Misrepresentation renders freedom of choice impossible Misrepresentation is coercive A person who intentionally misled, acts as the deceiver wants the person to act and not as the person would freely have chosen to act if the person had known the truth.

DUTY NOT TO COERCE

People act irrationally when under the influence of fear or emotional stress. When a seller takes advantage of a buyers fear or emotional stress to extract consent to an agreement that the buyer would not make if the buyer was thinking rationally, the seller is using duress or undue influence to coerce.

Criticism
Manufacturers not makes direct contract with customers

Reply
There is indirect agreement

Criticism
Consumer can also freely agrees to buy a product without specific qualities

Reply
Disclaimer can effectively nullify all contractual duties of the manufacturers

Criticism
Equality, far from being the rule, as the contract theory assumes, is usually the expectation

In Pakistan

Individual Responsibility

The due care theory of the manufacturer's duties to consumers is based on the idea that consumers and sellers do not meet as equals and the consumer's interests are particularly vulnerable to being harmed by the manufacturer, who has a knowledge and an expertise that the consumer lacks.

 The Due Care theory The legal doctrine of implied warranty.

An unspoken and unwritten guarantee that the product is safe during the ordinary uses for which it is intended.

Places most of the responsibility on the producer - more caveat vendor than caveat emptor Consumers do not have enough expertise Since producers are in a more advantaged position, they have a duty to take "special care" to make sure consumers are not harmed

Design - safety, adequate materials Production - no shortcuts or substitutions of inferior quality material; need adequate quality control Information - instructions, warnings, etc.

Manufacturers' responsibilities to exercise due care extend to the following three areas:

Design - A product's design should not conceal any dangers, should incorporate all feasible safety devices, and use adequate materials. The design should additionally be well tested to ensure that consumers will use the product properly.

Production - The manufacturing process must be controlled to eliminate any defective items, identify weaknesses, and ensure that unsafe economizing measures are not taken.

Information - The firm should fix labels, notices, and instructions on the product warning of all potential dangers involved in using or misusing the item.

 Manufacturers must also take into consideration the capacities of the persons who they expect will use the product.

If the possible harmful effects of using a product are serious or if they cannot be adequately understood without expert opinion, then sale of the product should be carefully controlled.

 How much "due care" is enough? Excessive due care

could raise the price of products dramatically Difficult to assess the balance between cost and benefits how much is a life worth? Can the manufacturer adequately assess all possible risks? (People do stupid things - think about Jackass) Sometimes the science is not adequate to assess all risk - an example is the risk from asbestos Is too paternalistic - takes all risk assessment out of the hands of consumers

 There are three difficulties with the due care theory. The basic problem with it is that there is no way to determine when one has exercised enough due care. Every product involves some small risk.

 If all risks were eliminated, few, if any, products would be affordable. Secondly, the theory assumes that the manufacturer can indeed discover all the risks attendant upon using a product before it is actually used and this may not be possible.

 Manufacture should pay of any injuries sustained through any defects in the product. Manufacture exercised all due care in design and manufacture of the product.

Manufacturer take precautions and warn user about foreseen danger.

Strict Liability

Manufacturer must bear the cost of injuries resulting from product design
All the cost internalizing lead to more efficient use of society resources.

Three point of utilitarian

Price reflect all cost producing and using of product & resources are not wasted.
Manufacturer have to pay motivated to exercise care reduce accidents. due to internalizing the all cost losses distributed among all users.

Brown & Williamson tobacco co.

5.6 billion dollar spend adds, aimed at teens every year. 2 million kids start smoking before the age of 21. Smoking kills 440000.

Overall economics losses 157 billion dollar.

No advertisement is more deceptive that used to sell cigarettes

Deceptive Adds

 Unfair to manufactures since it force hem to compensate unforeseeable injuries. Assumptions that adherence to the social cost view will prevent accidents is false. Leads to successful consumer lawsuits in cases where manufactures took all due care.

 Communication between a seller and potential buyers that is publically addressed to a massive audience and is intended to induce members of this audience to buy the sellers products.

 Public communication aimed at a mass audience Intended to induce members of its audience to buy the sellers product

Succeeds by creating a desire for the sellers product or a belief that a product will satisfy a preexisting desire

 SOCIAL EFFECTS

SPYCHOLOGICAL EFEFCT ADVRTISING AND WATSE ADVERTISING AND MARKET POWER

EFFECTS ON CONSUMER DESIRES

EFFECTS ON CONSUMER BELIEFS

Psychological effects of advertising:

It debases the taste of public by presenting irritating and aesthetically unpleasant displays

Advertising and Waste:

economically it is wasteful

Production Cost:
the cost of the resources consumed in producing or improving a product

Selling Cost:
the additional cost of resources that do not go into changing the product but are invested instead in getting people to buy the product
Example: Coke vs. Pepsi, u fone Vs. Jazz

Advertising and Market Power:

Nicholas Kaldor claimed that massive advertising campaigns of modern manufacturers enable them to achieve & maintain a monopoly power over their markets.

Desires

Physical Desires

Psychological in origin

Consumer is used merely as a mean for the advancing the ends and purposes of producers, and this diminishes the consumers capacity to freely choose

Examples: Juices Fast food Snacks Mobile, accessories etc.

It effects consumers belief.

It is mean of communication and like any other mean of communication it can be truthful or deceptive

Deceptive advertisement is a function of:

The authors intent to make the audience believe what is known to be false
The medias communication of the false message The audience vulnerability to deception

Example: Sona belt, MAGGIE NODELS, TELEMARKETIG ETC

 Right to privacy (dont interrupt)

Psychological privacy
Physical privacy Physical activities exposed the peoples inner lives

First

Avoid us to shame, ridicule ,embarrassment black mailing or others harms. Save our plans and allow us the freedom to behave in exceptional ways

Second

Third Forth

Protects those whom we love from being injured by having their beliefs about us shaken Protect our reputation

 First

Development of love trust and

friendship.

Second

Certain professional

relationship to exist.
sustain distinct social roles. themselves in a special way to those home they select.

Privacy enables person to

Third

People can presents

Forth

 Relevance Informing Consent Accuracy Purpose Recipients and security