Model-Based Evaluation of Cooling-off Policies

Christian Michel () and Andre Stenzel

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

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.

Keywords: Cooling-off; Equilibrium-based Inference; Identification of nonstandard preferences; Projection bias; Behavioral economics (search for similar items in EconPapers)
JEL-codes: D04 D18 D90 (search for similar items in EconPapers)
Pages: 49
Date: 2018-11
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Related works:
Journal Article: Model-based evaluation of cooling-off policies (2021)
Working Paper: Policy Evaluation in Behavioral Models (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2018_061v2

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