CALIFORNIA STATE UNIVERSITY, HAYWARD
COLLEGE OF BUSINESS AND ECONOMICS
GUIDELINES FOR CASE ANALYSIS
Rescission of the Passive Restraints Standard
I. MAIN ISSUES
1. Market failure:
(i) Is there market failure in the form of externalities in the case of seat belts/air bags in terms of
n insurance externality (high cost)
n health care externality
(ii) Is there a moral hazard problem with the seat belt law?
(i) Are consumers really poorly informed about their safety or are there alternative solutions to seat belts and air bags being made mandatory (e.g. education, public information campaigns, etc.)?
2. Value of a Human Life:
(i) What is the value of a human life?
(ii) What alternative methods are there for estimating the value of a human life (see Ex. 8 & 9 etc.)?
3. Cost-Benefit Analysis
(i) What are the lower and upper bound costs of the seat-belt law?
(ii) What are the lower and upper bound benefits of the seat-belt law?
(iii) What is the net benefit or cost of a life saved using (I) and (ii) above?
II. MAJOR ALTERNATIVES (EVALUATE EACH)
1. No laws regarding passive restraints
2. Passive restraint requirement
3. Mandatory seat belt usage
4. Educational campaigns
5. Economic incentives
6. Combination or hybrid alternatives
Please use the data in the case to support your arguments on these issues and look at the questions at the end of the case.