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Model-Based Evaluation of Cooling-off Policies

Author

Listed:
  • Christian Michel
  • André Stenzel
Abstract
This paper studies the ex-ante prediction and ex-post evaluation of the effects of cooling-off policies when consumers may exhibit a behavioral projection bias. We first set up a theoretical model and show that neither the adoption of a mandatory cooling-off period nor a return policy is generically superior or consumer welfare improving. Relating the model’s pre- and post-policy equilibrium combinations to their empirical analogues, we then show how market-level data can help to evaluate policies using baseline statistics and to sometimes even conclude whether consumers exhibit a projection bias. We further discuss the applicability to other policies and nonstandard preferences and the implications for policy design.

Suggested Citation

  • Christian Michel & André Stenzel, 2018. "Model-Based Evaluation of Cooling-off Policies," CRC TR 224 Discussion Paper Series crctr224_2018_061v2, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2018_061v2
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp061
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    References listed on IDEAS

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    More about this item

    Keywords

    Cooling-off; Equilibrium-based Inference; Identification of nonstandard preferences; Projection bias; Behavioral economics;
    All these keywords.

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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