of labeling and the setting of guidelines for off-gas standards would protect the more sensitive consumers, but would not unduly restrict the choices of less sensitive consumers. Such information might fill the gap created by the absence of repeat buying for many formaldehyde products (for example, furniture, cabinets, floor underlayment). It might also enable consumers suffering from irritation to distinguish formaldehyde from other possible sources of indoor air pollution as the cause. (A product's reputation, as generated through repeat buying of products or by the linking of health effects to products, typically can modify producer behavior without extra information.) However, given existing product liability law and the availability of product liability insurance, the combined effect of labels and standards is not clear. There is some evidence that information can trigger meritless litigation, with social costs that exceed the benefits of labeling or standards. It is also unclear how liability laws and insurance interact in governing producer responses to mandated standards. Producers may oversupply or undersupply safety (or oversupply or undersupply the risky attributes of the product). Anticipating producer behavior is the key to effective labeling or standards that achieve the socially desirable level of safety. Thus, the setting of broad guidelines for both labeling and standards, rather than mandating standards, is likely to be most effective in an initial approach to formaldehyde-product regulation; standards can be tightened later if experience suggests that safety is undersupplied.
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