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Recall economics

September 23rd, 2007

I am in the market for a wooden train set for my son as a Christmas present. In my opinion, this item is perfectly suited to be purchased used. Unfortunately, RC2 recently recalled about 1.5 million trains due to excessive levels of lead paint. The primary economic impact is quite bad for RC2, both directly in replacement costs and indirectly though loss of consumer confidence. However, it has one benefit for them: I am now hesitant to purchase used trains. So rather than paying $1-2 for each used train, I’ll probably end up paying about $10 for each new train. Ugh.

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