Preventing Factory Fires through Contracts: Case study of Garment Factories in Bangladesh

Sato, Hideki (2015): Preventing Factory Fires through Contracts: Case study of Garment Factories in Bangladesh. Published in: International Journal of Business and Social Research , Vol. 5, No. 4 (30 April 2015): pp. 9-13.

Abstract

Following a multi-decade history of lethal fires in the Bangladeshi garment industry, Sato (2012) proposed a contract framework that encourages manufacturers to adopt measures that reduce loss of life. Apart from the humanitarian imperative, the manufacturer has an incentive to sign the contract and adopt its preventative measures because an industrial disaster will cancel its relationship with its global retailer and end the related profits. This theoretical study specifies the optimal contract that incentivizes manufacturers and reduces the occurrence of garment industry fires.

• Item Type: MPRA Paper
• Language: English
• Keywords: Garment factory fires, Safety measures, Retailer, Optimal contract
• Subjects: D - Microeconomics > D6 - Welfare Economics > D62 - Externalities; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L67 - Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods; Household Goods; Sports Equipment

References

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Sato, H. (2012), Protecting against Disaster with Contracts, International Journal of Humanities and Social Science, 2(17), 251–253.

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