Consumer Protection Policies and Rational Behavior

Abstract

How consumers behave has important consequences when assessing the effectiveness of particular consumer protection policies. In this paper it is argued that policies that rely strongly on consumer rationality, such as information provision requirements, are considerably less effective in practice than what is foreseen under the usual assumptions of economic models. The relation between consumer behavior and a variety of consumer protection issues, such as unfair business practices, the benefits of standardization, information regulation, education campaigns, large scale scams and advertising, is analyzed.