Consumer Impact Assessment
Why Assess impact on consumers?
Understanding consumer impacts is critical to the success of public policies. Consumers not only benefit from competition, but also drive it, directly impacting on the competitiveness of firms and the productivity of a nation. However, consumers can also bear disproportionate risks and unintended consequences if expert analysis is not provided in the early stages when policies are being developed.
Traditional neo-classical economic models and microeconomic analysis generally focus on issues such as the cost of goods or services, their quality or availability, or other market phenomena. However, there is growing evidence that it is also important to take into account the limits of consumer rationality and self-interest, and the consumer’s ability to access, absorb and analyze information, both of which affect how consumers make choices in the marketplace.
This guide encourages analysts to use a combination of traditional and emerging analytical approaches when assessing consumer impacts. It recommends they examine who the consumers are in the context of the proposal, the number of consumers who will be affected, the magnitude of the risks they face, and the implications of their making poor decisions. Supporting material and examples are provided below and in the appendices. The basic analytical framework is built around three key factors that are critical to assessing how consumers may benefit from, or be harmed by, new policies:
- anticipated market price and supply — how the policy will change prices, quality and supply of consumer goods and services;
- behavioural impacts — how the policy will affect business-consumer transactions and relationships, and how it will affect consumers’ ability to make rational choices and thereby maximize their welfare and their influence on innovation and competitiveness; and
- distributional impacts — identifying which consumers will feel the greatest impact and how vulnerable and disadvantaged consumers may experience the change.
A broad range of information from a variety of sources can inform consumer impact analysis, particularly in areas that overlap with business and competition impact assessments. Examples include results obtained from using the various Treasury Board of Canada Secretariat cost-benefit and market impact assessment tools. This guide includes a brief section that sets out the importance and benefits of working directly with consumer groups. (See also Appendix B.)
The information in this guide is based on a research paper Industry Canada’s Office of Consumer Affairs commissioned from independent policy consultant Dr. Derek Ireland, entitled Methodology for Assessing the Consumer Impacts of New Regulations. The guide also reflects input from Canadian consumer groups and provincial and territorial consumer protection agencies; however, it does not represent a consensus of these stakeholders.
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