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Optional Law for Firms and Consumers: An Economic Analysis of Opting Into the Common European Sales Law

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The European Commission has launched the Regulation Proposal on a Common European Sales Law as an optional instrument for European firms and consumers. Several critical opinions have been raised against the optional nature, characterizing it as an instrument for social dumping (i. e. lowering consumer protection standards, given that no set of rules with higher levels of protection would ever be chosen by firms), as depriving consumers of any meaningful choice, and emphasizing its futility. In this paper we present a simple model showing how these critiques present theoretical flaws, even if one does not rely on the efficiency gains that increasing cross border trade may bring in terms of having more efficient firms serving consumers in other national markets. The role of verification or compliance costs, and of the impact of legal diversity on firms' operating costs is crucial for understanding the effects of an optional instrument, and may make high levels of consumer protection, and consumer choice implementable. We also characterize how different levels of the standard may lead to complete replacement of national standards and to the joint use of European and national standards.

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Paper provided by CEMFI in its series Working Papers with number wp2012_1207.

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Date of creation: Jun 2012
Handle: RePEc:cmf:wpaper:wp2012_1207
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