Cancel the Deal? An Experimental Study on the Exploitation of Irrational Consumers

Alexander W. Cappelen (), Stefan Meissner () and Bertil Tungodden
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Alexander W. Cappelen: Department of Economics, Norwegian School of Economics, 5045 Bergen, Norway
Stefan Meissner: Department of Economics, Norwegian School of Economics, 5045 Bergen, Norway

Management Science, 2025, vol. 71, issue 5, 3983-3995

Abstract: Consumers can sometimes be exploited because they make mistakes in their valuation of products. We present the results from a large-scale experimental study that examines whether third-party spectators from the general population in the United States cancel a voluntary deal where a buyer has made a mistake in the valuation of a product and agreed to pay more for the product than the seller knows it is worth. We find that the majority of the spectators cancel such deals, even when the seller’s involvement is limited to accepting a proposal made by the buyer. A substantial share of these spectators is also willing to fine the seller. However, a large minority of the spectators are willing to uphold the deal even when the seller has proposed the deal and obfuscated the information provided to the buyer. Our results shed new light on when people view market transactions as acceptable and their attitudes to government regulation of businesses.

Keywords: freedom; consumer protection; fairness; paternalism (search for similar items in EconPapers)
Date: 2025
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http://dx.doi.org/10.1287/mnsc.2023.01050 (application/pdf)

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Working Paper: Cancel the deal? An experimental study on the exploitation of irrational consumers (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:71:y:2025:i:5:p:3983-3995

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