Scandinavian Working Papers in Economics
Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics
No 6/2023: Cancel the deal? An experimental study on the exploitation of irrational consumers
Alexander W. Cappelen (), Stefan Meissner () and Bertil Tungodden ()
Additional contact information
Alexander W. Cappelen: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Stefan Meissner: Factworks GmbH
Bertil Tungodden: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Abstract: Consumers can sometimes be exploited because they make mistakes in their valuation of products. We present the results from a large-scale experimental study that examines whether third-party spectators from the general population in the United States cancel a deal where a buyer has made a mistake in the valuation of a product and agreed to pay more for the product than the seller knows it is worth. We find that the majority of the spectators cancel such deals even when the seller’s involvement is limited to accepting a proposal made by the buyer. A substantial share of these spectators are also willing to fine the seller. However, a large minority of the spectators are willing to uphold the deal even when the seller has proposed the deal and obfuscated the information provided to the buyer. Our results shed new light on when people view market transactions as acceptable and their attitudes to government regulation of businesses.
Keywords: Consumers; irrational behavior
JEL-codes: D63
Language: English
55 pages, April 6, 2023
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