BCCP’s research agenda is shaped by three main research questions: 1) What characterizes consumer and market behavior? 2) How should policies be optimally designed to protect consumers? 3) Are the existing institutions and policies effective? These research questions are applied to different topics and policy areas. With about 80 members, the spectrum of BCCP’s current research projects is broad. As a natural evolution of BCCP’s work over the past years, the effects of digitization on consumers and market participants are therefore a common theme throughout our three main research areas of consumer and market behavior, policy design and policy evaluation and a key topic in our research agenda.
Consumer and Market Behavior
The first fundamental step to optimally design consumer policies and study their effectiveness is a solid understanding of consumer behavior. This is not only affected by consumers’ preferences and biases but it also depends on the information available in the market, producers’ incentives to exploit consumers’ biases and manipulate the disclosure of information, as well as the design of existing market rules and institutions. The main aim of the different working packages related to this research area is to better understand consumers’ and firms’ incentives under different institutional scenarios.
Recent developments in behavioral economics showed that economic agents frequently make systematic and predictable mistakes. Such departures from rational behavior and well-documented biases make us question our understanding of the functioning of markets and raise the question of whether competition alone can ensure consumer benefits or if it will lead to the exploitation of consumers or to avoidable managerial mistakes. The common feature of the tasks within this research area is to build on these insights and use of micro-founded models of consumer and market behavior coupled with econometric and experimental studies to test their predictions.
This research area addresses the question of how to design policies that incentivize consumers and firms to behave in such a way that allows the attainment of specific policy goals. Hence, the unifying theme of the specific research projects within this area is a well-founded, systematic analysis of the feasibility of attaining particular policy goals together with the constraints faced to achieve them. Here, we provide an explicit and systematic description of both the objectives and the constraints that underlie specific policy design questions.
The specific objectives and constraints depend on the precise context determined by the policy in question, which is manifest in the research diversity in this area. For instance, the policy objective directly concerns the products quality for those projects that focus on safety and health issues. Whereas for other research projects – e.g., the design of competition policies – the use of a more general welfare objective such as consumer surplus or aggregate surplus is more appropriate. Further, the constraints imposed depend on how consumers and firms respond to different types of incentives. Consequently, this research area builds on research area I, which studies consumer and market behavior and allows us to understand their reactions to incentives.
Institutions and policies are implemented to achieve specific objectives. This research area aims to understand how effective these policy tools, institutions, and practices have been in reaching their goals. Policy evaluation has become a central instrument in policy making. First, policy-makers involved in consumer policies (e.g., regulatory agencies, competition authorities, ministries, and courts) are being held accountable for the sizable economic resources invested in the enforcement of these policies. Second, there is a growing interest in exploring how these policies can be more evidence-based and supported by empirical findings. Finally, through policy evaluations new insights can be gained on how to improve the implemented tools and to more effectively design the institutional setting under which policies are then enforced.
The common feature of the evaluation studies in this research area consists of applying state-of-the-art theoretical and empirical methodologies to understand if and why specific policy instruments were appropriate to reach their goals and how they could potentially be improved. These steps require the collection of suitable evidence and data as well as the definition of techniques and methodologies that can appropriately be used to make causal inference on the policy outcomes. This causal analysis assesses whether consumers would have been better off, had the policy maker made a different choice.