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The Consumer Scam: An Agency-Theoretic Approach

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  • Sareh Pouryousefi

    (University of Nottingham)

  • Jeff Frooman

    (University of New Brunswick)

Abstract

Despite the extensive body of literature that aims to explain the phenomenon of consumer scams, the structure of information in scam relationships remains relatively understudied. The purpose of this article is to develop an agency-theoretic approach to the study of information in perpetrator–victim interactions. Drawing a distinction between failures of observation and failures of judgment in the pre-contract phase, we introduce a typology and a set of propositions that explain the severity of adverse selection problems in three classes of scam relationships. Our analysis provides a novel, systematic explanation of the structure of information that facilitates scam victimization, while also enabling critical scrutiny of a core assumption in agency theory regarding contract design. We highlight the role of scam perpetrators as agents who have access to private information and exercise considerable control over the terms and design of scam relationships. Focusing on the consumer scam context, we question a theoretical assumption, largely taken for granted in the agency literature, that contact design is necessarily in the purview of the uninformed principal.

Suggested Citation

  • Sareh Pouryousefi & Jeff Frooman, 2019. "The Consumer Scam: An Agency-Theoretic Approach," Journal of Business Ethics, Springer, vol. 154(1), pages 1-12, January.
    • Handle: RePEc:kap:jbuset:v:154:y:2019:i:1:d:10.1007_s10551-017-3466-x
    DOI: 10.1007/s10551-017-3466-x
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    References listed on IDEAS

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