Abstract Consumers often value products whose purchase could also harm them, either through adverse health effects or, often with digital products, the release of sensitive data about themselves. In many cases, consumers do not know exactly how great these risk are, but they can engage in some research to learn more about it. Alternatively, the government can choose to prohibit products that pose sufficiently great privacy or health risks. Whether or not the government does so will affect both the consumers purchase and research decision. This paper analyzes the effect of such bans when consumers can become informed at a cost, showing that when the maximum possible harm is large enough, it can be optimal to ban high-harm products, not so much to protect consumers from its consumption but rather to spur consumption of the product when its harm is lower. The possibility of banning high-harm products can reassure consumers that products that are not banned pose less risk. The paper also shows that it is not necessarily the case that higher information costs always make product bans more desirable. In some cases, banning a high-harm product is optimal for intermediate values of information costs but not for low or high values.
Abraham L. Wickelgren (Sat,) studied this question.