Regulating Cancellation Rights with Consumer Experimentation

Florian Hoffmann, Roman Inderst and Sergey Turlo

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: Embedding consumer experimentation with a product or service into a market environment, we find that unregulated contracts induce too few returns or cancella tions, as they do not internalize a pecuniary externality on other firms in the market. Forcing firms to let consumers learn longer by imposing a commonly observed statutory minimum cancellation or refund period is socially efficient only when firms appropriate much of the market surplus, while it backfires otherwise. Interestingly, cancellation rights are a poor predictor of competition, as in the unregulated out come firms grant particularly generous rights when competition is neither too low nor too high.

Date: 2018
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https://www.econstor.eu/bitstream/10419/253659/1/R ... _Experimentation.pdf (application/pdf)

Related works:
Working Paper: Regulating Cancellation Rights with Consumer Experimentation (2019)
Working Paper: Regulating Cancellation Rights With Consumer Experimentation (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:253659

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