Consumer Policy Tools

Background Paper to Creating Confident Consumers

May 2003

Previous Page / Table of Contents / Next Page

Summary

In summary, there is a broad range of consumer policy tools available to policy-makers for addressing problems of consumer protection.

Problem definition and scoping is an essential first step when addressing consumer issues, because it will help to characterise whether the appropriate intervention is through consumer policy, competition policy or economic regulation. It can also help in making a discriminating initial choice of policy tool.

Identification of a consumer issue does not create a presumption that the government should regulate. Instead, policy-makers should ask whether a market-based solution will emerge in a reasonably timely and effective form and whether that solution will be optimal.

There are a number of ways in which the market can correct informational problems, by responding to the heuristic devices that consumers use when making decisions under uncertainty. There are a variety of barriers to these responses that are emerging in a competitive market, and there are a number of ways in which government can help the market to overcome those barriers.

In the absence of a viable market-based solution, government may have to consider regulatory interventions to address informational problems in consumer transactions. When designing and choosing policy tools, policy-makers need to be aware of trade-offs between different options.

Previous Page / Table of Contents / Next Page