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Inappropriate sales in the financial services industry: the limits of the rational calculus?

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  • David Leece

    (Department of Management, University of Keele, Staffordshire, UK)

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    Abstract

    The paper explores the notion of 'misselling' in the context of financial services. 'Misselling' is treated as a special case of error in the classification of a discrete dependent variable. A simulation study is conducted using the sale of mortgage debt to outright owners of property as an example of how inappropriate sales manifest themselves. This is followed by the actual case of endowment mortgage sales. The results and discussion suggests that 'misselling' can be viewed (i) in the context of empirical regularities and a rationalizable view of the data and|or (ii) as a non rationalizable situation where the 'misselling' becomes 'pathological'. The paper highlights the need for a behavioural perspective, in addition to a more conventional economic treatment of the 'misselling' phenomenon. Copyright © 2000 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/mde.978
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

    Volume (Year): 21 (2000)
    Issue (Month): 3-4 ()
    Pages: 133-144

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    Handle: RePEc:wly:mgtdec:v:21:y:2000:i:3-4:p:133-144

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    Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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    1. Borgers, Tilman, 1996. "On the Relevance of Learning and Evolution to Economic Theory," Economic Journal, Royal Economic Society, vol. 106(438), pages 1374-85, September.
    2. Foxall, Gordon R., 1999. "The marketing firm," Journal of Economic Psychology, Elsevier, vol. 20(2), pages 207-234, April.
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