INFORMATION AND THE LIFE CYCLE CONSUMPTION OF HAZARDOUS GOODS

Safety is a major area of public concern. The fact that people take risky occupations, smoke or fail to use seat belts often provokes a regulatory response designed to either protect people from the risks directly or to provide them with more information on the hazards involved. Such policy is often based on the view that risk‐taking behavior is irrational or ill‐advised. This paper develops life cycle models of the decision to consume hazardous goods. A particular focus of the analysis is to consider the rational response to information about hazards. Rational consumption of a hazardous good is shown to depend on such factors as the nature of the hazard, age, life expectancy, age at which information on the hazard was received and, of course, the underlying value of the good itself.