Abstract

A set of institutions to protect consumer´s rights take a central role to reduce transaction costs contributing to economic efficiency and social equity. Unfortunately, consumer protection is still poor and weak in most developing countries. In this paper we focus on a particular institution of Consumer Law, implied warranties, current in most Latin American legal system. We develop a model to assess the economic consequences of introducing mandatory and uniformly implied warranties and their effects concerning to the moral hazard problem. Two main aspects will be crucial in order to design implied warranties efficiently: first, to determine the operative conditions to trigger warranties; second, to identify the empirical context in which implied warranties should applied. Then, certain topics related to institutional design and empirical constraints that may arise, especially in Latin American, are discussed.