Imperfect information about consumer rights: Implications for efficiency and distribution

Baumann, Florian ; Friehe, Tim ; Wenzel, Tobias

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URN: urn:nbn:de:bsz:180-madoc-613468
Document Type: Working paper
Year of publication: 2021
The title of a journal, publication series: ZEW Discussion Papers
Volume: 21-098
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D18 , K12 , K13,
Keywords (English): consumer policy , imperfect information , efficiency , product safety , distribution
Abstract: This paper shows that the provision of consumer rights can decrease welfare when some consumers remain ignorant of these rights. We find that consumers uninformed about a mandated warranty demand excessively safe products in some circumstances. In other circumstances, uninformed consumers buy the efficient product variety like informed consumers but the former cross-subsidize the latter via firms’ pricing. With respect to the salient policy option of improving information about consumer rights, we find that increasing the share of informed consumers may actually raise the risk of inefficiency.

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.

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