Tuesday, 29 June 2010

Regulating consumer behaviour, or: why one might wait getting an iPad and other lessons from behavioural studies

Last Friday and Saturday, 25 and 26 June, an international and interdisciplinary symposium on ‘Behavioural economics, consumer policy and consumer law’ took place at the European University Institute in Florence. The symposium was organised by Professor Hans-W. Micklitz (EUI) and Professor Lucia Reisch (Copenhagen Business School) on behalf of the Journal of Consumer Policy and brought together experts in the fields of law, economics, law & economics, psychology and sociology, as well as policymakers from the EU and US.

The more empirically oriented presentations gave interesting insights into the effects of information on consumer decision making and behaviour, addressing the shaping of consumer preferences (an iPhone introduced at a price of $600 will seem a bargain if some months later it is offered for ‘merely’ $200), the possible counter-effects of full disclosure of information (consumers paradoxically acquiring more financial products after having been informed of a conflict of interests of the seller), the psychology of impulsive buying (the understanding of which could, for instance, help nudge consumers towards healthy food and away from unhealthy snacks on display in stores), the impact of health policies on eating behaviour (e.g. governments signing agreements with the fashion industry to increase the size of fashion models, in order to prevent eating misbehaviour by young people trying to conform to the beauty ideal portrayed in the media), and the relation of a client’s financial knowledge to the quality of financial advice obtained from a bank (clients with high knowledge obtaining better advice than those with less expertise).

From a more theoretical perspective, the question was confronted of how to implement the results of these behavioural studies in policy making. To what extent is it possible to predict errors that consumer contracting parties will make? And should these be translated into a framework of limited choices for consumers? To what extent does this involve both the legislature and the judiciary? In other words, to what extent can normative guidelines be derived from behavioural studies?

These questions were addressed in the remaining presentations and the discussion. In very broad lines, one could say that EU consumer policy has so far concentrated on redressing the information asymmetry between consumers and professionals. As Professor Micklitz pointed out, a radical self-assessment would be called for in order to find out what has so far been achieved with legal tools in consumer policy – in particular, have the remedies available to consumers in case of breach of contract, damage, etc, been useful? (a topic that is also being discussed in the context of the proposal for a Consumer Rights Directive, as was signalled in an earlier post on this blog)

The direction that the development of consumer policy on the basis of behavioural law & economics, psychology and sociology should take mostly seemed to puzzle the lawyers in the audience, well, in any case the undersigned. Is it only one-way traffic or can legal scholarship also contribute to behavioural studies?

As a conclusion to this (way too long) post: it is clear that behavioural studies have an impact on consumer policy making in Europe, as one can see in the importance awarded to monitoring instruments such as the Consumer Markets Scoreboard, the development of an OECD Toolkit for policymakers, and the general emphasis on information duties in the existing consumer Directives. Surprisingly enough, however, it seems that researchers from the different disciplines have hardly begun the dialogue on how to combine forces to reach better results in the field of consumer protection. This conference managed to get one started. The floor is open…

NB: The Journal of Consumer Policy will publish a special issue on the topic and invites the submission of papers.

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