the ethics of market production and marketing

7/27/2019 The Ethics of Market Production and Marketing

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The Ethics OfMarket ProductionAnd Marketing


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Injuries from auto related accident averaged 56,270

each week, death averaged 117 per day and financialloses 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.


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Free and competitive market can help decreasein injuries.

Neither government nor business personal cancontrol.

Free markets promote allocation, use anddistribution of goods in a certain sense,respectful of rights, maximum utility maximize

and sovereign.


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Consumer safety is seen as a good that is most efficientlyprovided 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 bycustomer otherwise they risk losing customers tocompetitors who cater to the preferences of consumers.

No government and business personal interferes.


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Critics to the market approach respond that the

benefits of free markets are obtained onlywhen the markets have all of the sevendefining characteristics:

a. There are numerous buyers and sellers.

b. Everyone can freely enter and exit the market.

c. Everyone has full and perfect information.


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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 consumerissues argue that these characteristics are

absent in consumer markets.


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Many product are too complex for consumer tounderstand.

Markets cannot provide consumer with productinformation.

Solution to this problem is consumers union.

Free riders.


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Few people are good are at estimating

probabilities.

People are irrational and inconsistent whenweighing choices.

Many consumers markets are monopolies andoligopolistic.


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It is clear responsibility rest on consumers.

Care less in use of products

Use tools and instrument that they dont haveskills and knowledge.

Injuries also arises from flaw in product design.


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About 50 percent of the products in Pakistan are either

substandard, adulterated or counterfeit that haveflooded the markets and the consumers are beingcheated due to the absence of consumer protection lawsand lack of enforcement of existing food and drug laws.

There are only three active consumer protectionorganizations are working in Pakistan, compared toIndia where 5,000 such organizations are operating.


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Helpline Trust chairman, A Hamid Maker, said that in Pakistan, the

worst enemies of the consumers are the consumers themselves, asthey refuse to exercise their rights and purchase products and acceptservices without checking price or quality. Citing the example he saidthat there are over 300 brands of cooking oil and bottled wateravailable in the markets in various sizes of tins, bottles and plasticcans, but only nine cooking oil and 22 banaspati manufacturers, 36water bottlers, one biscuit manufacturer, and only one carbonateddrinks manufacturer were registered with Pakistan Standards AndQuality Control Authority (PSQCA).


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Contract View Due Care View Social Costs View


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The view that the relationship between a businessfirm and its consumers is essentially a contractual

relationship and the firms moral duties to thecustomer are those created by this contractual

relationship.


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Duty to comply

Duty of Disclosure

Duty Not to Misrepresent

Duty not to Coerce


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Duty To Comply

The basic moral duty that a business firm owes itscustomers (under contract view) is the duty toprovide consumers with a product that lives up tothose claims that the firms expressly made aboutthe product which led the customers to enter thecontract freely


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Duty To Comply

Eg. Winthrop Laboratories - marketed a painkiller thatit advertised as non addictive. A patient using thepainkiller became addicted to it and died of overdose

Court found Winthrop liable for the patients deathbecause although it had expressly stated that thedrug as non addictive. Winthrop Labs had failed tolive up to its duty to comply with this expresscontractual claim


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Reliability

service life

maintainability

safety


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THE DUTY OF DISCLOSURE

An agreement is not binding unless both parties to the

agreement knows what they are doing and freelychoose 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 anycharacteristics of the product that could affect thecustomers decision to purchase the product


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The Duty Not To Misrepresent

Misrepresentation renders freedom of choiceimpossible

Misrepresentation is coercive

A person who intentionally misled, acts as thedeceiver wants the person to act and not as theperson would freely have chosen to act if the

person had known the truth.


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DUTY NOT TO COERCE

People act irrationally when under theinfluence of fear or emotional stress.

When a seller takes advantage of a buyers

fear or emotional stress to extract consent toan agreement that the buyer would not makeif the buyer was thinking rationally, the selleris using duress or undue influence to coerce.


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Criticism

Manufacturers not makes direct contract withcustomers

Reply

There is indirect agreement


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Criticism

Consumer can also freely agrees to buy a productwithout specific qualities

Reply

Disclaimer can effectively nullify all contractual duties of themanufacturers


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Criticism

Equality, far from being the rule, as the contracttheory assumes, is usually the expectation


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In Pakistan


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Individual Responsibility


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The due care theory of the manufacturer's duties to

consumers is based on the idea that consumers andsellers do not meet as equals and the consumer'sinterests are particularly vulnerable to being

harmed by the manufacturer, who has aknowledge and an expertise that the consumerlacks.


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The Due Care theory The legal doctrine of impliedwarranty.

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 - morecaveat vendorthan caveat emptor

Consumers do not have enough expertise

Since producers are in a more advantaged position, theyhave a duty to take "special care" to make sure

consumers are not harmed


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Design - safety, adequate materials

Production - no shortcuts or substitutions of inferiorquality material; need adequate quality control

Information - instructions, warnings, etc.


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Manufacturers' responsibilities to exercise due careextend to the following three areas:

Design - A product's design should not conceal anydangers, should incorporate all feasible safetydevices, and use adequate materials.

The design should additionally be well tested toensure that consumers will use the product properly.


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Production - The manufacturingprocess must be controlled toeliminate any defective items,identify weaknesses, and ensure that

unsafe economizing measures arenot taken.


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Information - The firm should fixlabels, notices, and instructionson the product warning of all

potential dangers involved inusing or misusing the item.


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Manufacturers must also take intoconsideration the capacities of the persons

who they expect will use the product.

If the possible harmful effects of using aproduct are serious or if they cannot beadequately understood without expertopinion, then sale of the product should becarefully controlled.


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How much "due care" is enough? Excessive due carecould raise the price of products dramatically

Difficult to assess the balance between cost andbenefits how much is a life worth?

Can the manufacturer adequately assess all possiblerisks? (People do stupid things - think aboutJackass)

Sometimes the science is not adequate to assess allrisk - an example is the risk from asbestos

Is too paternalistic - takes all risk assessment out ofthe hands of consumers


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There are three difficulties with the

due care theory. The basic problemwith it is that there is no way todetermine when one has exercised

enough due care. Every productinvolves some small risk.


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If all risks were eliminated, few, if any,products would be affordable.

Secondly, the theory assumes that themanufacturer can indeed discover all the

risks attendant upon using a productbefore it is actually used and this may notbe possible.


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Manufacture should pay of any injuries sustained

through any defects in the product.

Manufacture exercised all due care in design andmanufacture of the product.

Manufacturer take precautions and warn user aboutforeseen danger.


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Strict Liability

Manufacturer must bear the cost of injuries resulting fromproduct design

All the cost internalizing lead to more efficient use of

society resources.


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Three point of utilitarian

Price reflect all cost producing and using of product &resources are not wasted.

Manufacturer have to pay motivated to exercise carereduce accidents.

due to internalizing the all cost losses distributed amongall users.


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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


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Deceptive Adds


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Unfair to manufactures since it force hem to

compensate unforeseeable injuries.

Assumptions that adherence to the social costview will prevent accidents is false.

Leads to successful consumer lawsuits in caseswhere manufactures took all due care.


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Communication between a seller andpotential buyers that is publicallyaddressed to a massive audience and isintended to induce members of thisaudience to buy the sellers products.


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Public communication aimed at a mass audience

Intended to induce members of its audience tobuy the sellers product

Succeeds by creating a desire for the sellersproduct or a belief that a product will satisfy apreexisting desire


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SOCIAL EFFECTS

SPYCHOLOGICAL EFEFCT ADVRTISING AND WATSE

ADVERTISING AND MARKET POWER

EFFECTS ON CONSUMER DESIRES

EFFECTS ON CONSUMER BELIEFS


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Psychological effects of advertising:

It debases the taste of public by presenting irritating and

aesthetically unpleasant displays


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Advertising and Waste:economically it is wasteful

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

Selling Cost:

the additional cost of resources that do not go intochanging the product but are invested instead ingetting people to buy the product

Example: Coke vs. Pepsi, u fone Vs. Jazz


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Advertising and Market Power:

Nicholas Kaldor claimed that massive advertisingcampaigns of modern manufacturers enable them

to achieve & maintain a monopoly power overtheir markets.


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Desires

PhysicalDesires Psychologicalin origin


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Consumer is used merely as a mean for the advancing the

ends and purposes of producers, and this diminishes theconsumers capacity to freely choose

Examples:

JuicesFast foodSnacksMobile, accessories etc.


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It effects consumers belief.

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

deceptive


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Right to privacy (dont interrupt)

Psychological privacy

Physical privacy

Physical activities exposed the peoplesinner lives


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First

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Forth

Avoid us to shame, ridicule ,embarrassment black

mailing or others harms.

Save our plans and allow us the freedom to behave in

exceptional ways

Protects those whom we love from being injured by

having their beliefs about us shaken

Protect our reputation


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First

Second

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Forth

Development of love trust andfriendship.

Certain professionalrelationship to exist.

Privacy enables person tosustain distinct social roles.

People can presentsthemselves in a special way tothose home they select.


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the ethics of market production and marketing

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