Consumer protection rules are many and diverse. To adopt new rules legislators need to know how consumers react in certain situations. Insights from behavioral economics are helpful in this respect. Yet, whether consumers need protection and how a safeguard mechanism can be implemented ideally need to be evidence-based. Unfortunately, the current German official statistics and other data sources do not allow for a serious evaluation of consumer policy measures and an evidence-based policy design. This task aims first of all at implementing a periodic survey and collect data on consumer information, switching, dismissal, as well as complaint behavior and knowledge. One result could be a toolkit for demand-side policy instruments that take into account the type of consumers in terms of knowledge (well-informed vs. illiterate or vulnerable consumers) or other socio-economic characteristics (e.g., age, income, education, family status, etc.).
Furthermore, every new rule changes the institutional framework, which can influence consumer behavior. Flooding consumers with information to cure market inefficiencies might create a lack of attention. Strict regulation of advertisements to protect even the most inattentive consumers might even reduce the consumers' attention to detail in the long run. Such legally caused consumer weaknesses lead to the question of whether consumers need more protection. Conversely, a smart repatriation of protection might promote long term consumer capabilities. A further objective of this task is to analyze the relation between consumer protection laws and consumer behavior as well as to draw conclusions for the creation and application of consumer protection rules. From a legal perspective the question arises of how much these knock-on effects have to be taken into account by legislators. Even though impact assessment is already a common tool in the European Union, the question remains of whether the use of such techniques should be mandated by law. In addition, the application of general clauses concerning unfair business-to-consumer commercial practices raises the question of whether courts are able to consider such long term effects by settling case law. At the broader level, it is important to understand how the institutional framework of consumer policy is designed. This is central in the current German discussion on the appointment of an advisory board for the counselling of consumer politics at the federal level as well as the creation of committee with a special focus on consumer researcher within the German Ministry for Justice and Consumer Protection.
One particular policy to be analyzed within this task addresses return rights. The European directive 2011/83/EU harmonizes earlier legislation on "distance sales contracts". It mandates a withdrawal right for consumers of two weeks. The guidelines to the directive provide different rationales for the regulation. The most prominent one is that the directive protects internet consumers because it ensures that customers can base their final buying decision on the same informational basis as in a traditional store. This rationale stresses the role of private information on part of the consumer. A further rationale is based on the idea that return rights protect consumers from low quality, because, similar as a warranty, it punishes sellers with bad quality. This rationale therefore stresses private information of the seller about product quality. We aim at comparing the effectiveness of the regulation with respect to both rationales and investigating the interplay between them. Specifically, in the case where return rights are to protect consumers from bad quality, the question arises to what extent such legally mandated withdrawal rights interfere with the incentives of sellers to signal quality by offering return policies voluntary. The task further investigates alternative regulatory measures such as money-back guarantees vs. replacement or performance warrantees. Moreover, the task investigates the effect of the regulation when the consumer’s private information is interdependent. Such interdependencies between buyers may give rise to an endogenous common value effect that the seller’s outside option depends on the buyer’s private information.