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

Author

Listed:
  • 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)

  • Bertil Tungodden

    (Department of Economics, Norwegian School of Economics, 5045 Bergen, Norway)

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.

Suggested Citation

  • Alexander W. Cappelen & Stefan Meissner & Bertil Tungodden, 2025. "Cancel the Deal? An Experimental Study on the Exploitation of Irrational Consumers," Management Science, INFORMS, vol. 71(5), pages 3983-3995, May.
    • Handle: RePEc:inm:ormnsc:v:71:y:2025:i:5:p:3983-3995
    DOI: 10.1287/mnsc.2023.01050
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