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Exploring the Political Economy of Consumer Legislation: The Development of Automobile Lemon Laws

Published online by Cambridge University Press:  20 January 2017

Brian Shaffer  and
Daniel T. Ostas
Brian Shaffer*
Affiliation:
University of Maryland
Daniel T. Ostas*
Affiliation:
University of Oklahoma
*
Brian Shaffer, Robert H. Smith School of Business, University of Maryland, College Park, MD 20742–1815. E-mail: [email protected].
James G. Harlow, Jr., Chair in Business Ethics, Michael F. Price College of Business, University of Oklahoma, Adams Hall, 307 W. Brooks, Norman OK 73019.
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Abstract

Between 1982 and 1994 all fifty states enacted new car warranty legislation commonly known as ‘lemon laws’. These statutes provide that a consumer who buys a lemon (defined as ‘a chronically defective new car that cannot be repaired with a reasonable effort’) is entitled to receive a replacement car or full refund from the car's manufacturer. We ask why these laws were enacted, exploring both economic and political rationales. The analysis demonstrates that reasonable economic arguments can be advanced for the legislation, both pro and con, and concludes that the legislation resulted most directly from an alliance of consumer advocates and automobile dealers at the expense of manufacturers. This case study illustrates the interplay of legal, political, and economic factors that shape consumer legislation generally.

Type
Research Article
Information
Business and Politics , Volume 3 , Issue 1 , April 2001 , pp. 65 - 76
Copyright
Copyright © V.K. Aggarwal 2001 and published under exclusive license to Cambridge University Press 

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