The unintended consequence of doorstep consumer protection: surprise, reciprocation, and consistency

Abstract

Cooling-off periods are universally employed in doorstep selling regimes. Paired with a right for consumers to withdraw from the contract, this legal instrument seeks to protect consumers against superior skilled and knowledgeable sellers thus restoring the balance of interests. According to prior literature, cooling-off periods also serve an economic function by moderating the abuse of market power, by mitigating problems of hidden characteristics, and by promoting consumer choice. If their drawbacks-mainly the creation of consumer moral hazard and shifting of risk to the seller-can be contained, cooling-off periods are hence supposed to yield efficiency gains. By thinking out of this box, the present paper showcases that cooling-off periods also establish the perverse incentive for the seller to increase consumer compliance to a level which outlasts the cooling-off period. I argue that inevitably occurring psychological factors and transaction costs from the cooling-off regime amplify each other, thus creating a hard-lock status-quo bias. Based on behavioural insights and transaction cost theory, I predict that an inefficiently high number of consumers will enter into a doorstep contract and that, at the same time, the number of cancelled contracts will be inefficiently low. Consequently, I propose to change the default inherent in current cooling-off regimes from presumed consent to presumed withdrawal in order to debias consumers' withdrawal decision

How behavioural research has informed consumer law: the many faces of behavioural research

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“…This 'apparent anti-model of behavioural regulation' 199 is now at stake again. In the light of the new findings of behavioural economics and social psychology, 200 some European legal scholars thus explicitly argue for more 'intrusive' consumer policies. 201 However, the idea of governance by nudges, which came to Europe from the United States, is charged with different cultural premises: 202 a strong 'normative commitment to freedom of choice' 203 and, relatedly, to regulatory strategies of 'debiasing' individual decision-making, which suggests that it is possible to get down to pure preferences that are free from any cognitive or social distortions.…”