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Fairness Crowded Out by Law: An Experimental Study on Withdrawal Rights

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  • Georg Borges
  • Bernd Irlenbusch

Abstract

Withdrawal rights protect buyers in distance selling, for example when ordering via the Internet. After introducing such a law in Germany the proportion of returned goods drastically increased although most sellers had already offered a return option before. We experimentally investigate scenarios in which sellers can voluntarily offer a withdrawal right. In a second treatment it is provided by law. We find indications that a voluntary provision is perceived as friendly, so that buyers reciprocate by not exploiting sellers too heavily. A third treatment reveals that small return costs for buyers have only a marginal influence on withdrawal behaviour.

Suggested Citation

  • Georg Borges & Bernd Irlenbusch, 2007. "Fairness Crowded Out by Law: An Experimental Study on Withdrawal Rights," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(1), pages 84-101, March.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200703)163:1_84:fcobla_2.0.tx_2-f
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    References listed on IDEAS

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    1. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
    2. Fahr, Rene & Irlenbusch, Bernd, 2000. "Fairness as a constraint on trust in reciprocity: earned property rights in a reciprocal exchange experiment," Economics Letters, Elsevier, vol. 66(3), pages 275-282, March.
    3. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
    4. Abbink, Klaus & Irlenbusch, Bernd & Renner, Elke, 2000. "The moonlighting game: An experimental study on reciprocity and retribution," Journal of Economic Behavior & Organization, Elsevier, vol. 42(2), pages 265-277, June.
    5. Michael Kosfeld & Armin Falk, 2006. "The Hidden Costs of Control," American Economic Review, American Economic Association, vol. 96(5), pages 1611-1630, December.
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    Citations

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    Cited by:

    1. Samuel Bowles & Sandra Polania-Reyes, 2011. "Economic incentives and social preferences: substitutes or complements?," Department of Economics University of Siena 617, Department of Economics, University of Siena.
    2. Jing Liu & Anthony Meder & Steven T. Schwartz & Richard A. Young, 2022. "Whither the hidden returns to control: A short research paper," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3361-3369, December.
    3. Werner Güth & Georg von Wangenheim, 2007. "Fairness Crowded Out by Law: An Experimental Study on Withdrawal Rights. Comment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(1), pages 102-105, March.
    4. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A preference-Based Lucas Critique of Public Policy," UMASS Amherst Economics Working Papers 2009-11, University of Massachusetts Amherst, Department of Economics.
    5. Christoph Engel & Urs Schweizer, 2007. "Editorial Preface," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(1), pages 1-4, March.
    6. Christoph Engel, 2018. "Empirical Methods for the Law," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 174(1), pages 5-23, March.
    7. Bettina Rockenbach, 2007. "Fairness Crowded Out by Law: an Experimental Study on Withdrawal Rights. Comment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(1), pages 106-108, March.
    8. Samuel Bowles & Sandra Polania-Reyes, 2012. "Economic Incentives and Social Preferences: Substitutes or Complements?," Journal of Economic Literature, American Economic Association, vol. 50(2), pages 368-425, June.
    9. Bernd Lahno, 2007. "On the Coevolution of Retribution and Trustworthiness: An (Indirect) Evolutionary and Experimental Analysis. Comment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(1), pages 163-166, March.
    10. Ranftl, Simone & Lurger, Brigitta & Brohmer, Hilmar & Athenstaedt, Ursula, 2022. "The Consumer Option Model for Withdrawal Rights in the EU: Analysis of an Alternative Design," American Journal of Trade and Policy, Asian Business Consortium, vol. 9(1), pages 23-42.
    11. J. Luzak, 2014. "To Withdraw Or Not To Withdraw? Evaluation of the Mandatory Right of Withdrawal in Consumer Distance Selling Contracts Taking Into Account Its Behavioural Effects on Consumers," Journal of Consumer Policy, Springer, vol. 37(1), pages 91-111, March.
    12. Christoph Engel & Michael Kurschilgen, 2011. "The Coevolution of Behavior and Normative Expectations. Customary Law in the Lab," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2011_32, Max Planck Institute for Research on Collective Goods.
    13. Christoph Engel & Urs Schweizer, 2012. "Testing Contracts 29th International Seminar on the New Institutional Economics June 15-18, 2011, Krakow, Poland," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(1), pages 1-4, March.
    14. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A Preference-based Lucas Critique of Public Policy," CESifo Working Paper Series 2734, CESifo.

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    More about this item

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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