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MENTAL MODEL · M1418

Demerit Good

Demerit Good
BusinessHigh supportEconomics
Included
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Version 1.0.0 · Updated 2026-07-30

CORE DEFINITION

Goods that are harmful to consumers, but are over-consumed due to insufficient information or lack of self-control (e.g., tobacco, alcohol, gambling). Governments typically impose taxes or regulations on them.

SCAFFOLDING EFFECT

psychology

Reduce cognitive load

Understanding 'paternalistic' intervention. It explains why certain seemingly 'free choices' (e.g., not wearing a helmet) are prohibited, because individuals' irrational choices impose external costs on society.

anchor

Anchor fast decisions

A demerit good is a good whose social value is lower than individuals' subjective evaluation: consumers over-consume due to insufficient information or weak self-control, and its consumption generates negative externalities (health, safety costs spill over to society). This provides a rationale for 'paternalistic' intervention (taxes, bans, mandates) to correct the social costs of individuals' irrational choices.

MINIMUM ACTION

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Source support: Explicit

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    en.wikipedia.orghttps://en.wikipedia.org/wiki/Demerit_goodZH · Explicit
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