1.6.3—Merit goods

A merit good creates benefits that consumers may undervalue, so imperfect information can lead to under-consumption relative to the socially desirable level.

The market outcome reflects perceived private benefit, while education or vaccination may also create wider benefits. Policy can improve information, subsidise use or provide the good directly.

People may delay preventive health checks because they underestimate future benefits; reminders, information and subsidised access can increase uptake.

Calling a good merit does not mean every person must consume more; the economic issue is systematic information and welfare divergence.