Question

ignoring incentives from the legal system what incentives do businesses have to: a) make safe products b) reduce worker iniury risk c) avoid polluting the environment?

Answer 1

A) Businesses have incentives to make safe products as long as Consumers are in the know of the product's risk. When Consumers are informed, reducing risk will increase the product's price, that is, Consumers will pay more for less risky products and vice versa.

B) As long as workers are informed about the risk, businesses have incentives to lower the frequency of workers injuries, which will in turn alter terms of contract. And, businesses also have incentives to reduce the severity of workers injuries, which often harm work operations.

C) businesses have incentives to take care of the environment, if people who buy products from the firm, care about the environment and are willing to pay higher price for the products of the firm that takes care of the environment. And, alter the transaction terms if the firm harms the environment.

Also, if workers are willing to work at lower wage rates at the firm which takes care of the environment, then firm will avoid polluting the environment.