Consumer Law and Neuroeconomics: Legal policy concerns from a neuroeconomic perspective

Mia Nedergaard Danielsen

Student thesis: Master thesis

Abstract

Neuroeconomic theory has shown that consumers do not always make rational decisions and that decision making to a high degree is affected by emotions and unconscious processes that are often not corrected by the cognitive and conscious processes, thus leading to irrational behavior. Consumer policy has recognized that the consumer in a contractual relation with a trader can be regarded as the weaker party. This recognition has led to consumer policy concerns such as consumer protection and consumer information with the aim of strengthening the role of the consumer in the economic market. These concerns have been realized either through means of information or where such information is not regarded as sufficient through consumer law. This thesis seeks to examine to what extent it is possible to meet the legal policy concerns underlying consumer law from a neuroeconomic perspective. Thus, how does the consumer’s own behavior affect the possibility of meeting the legal policy concerns created for the consumer. By examining the effectiveness of two consumer rules based on the legal policy concerns, it was made clear that even though the rules should strengthen the consumer’s position on the market through providing the consumer with information, the consumer do not always make use of the rules. Therefore, the two rules could not be regarded as effective. A neuroeconomic analysis of the observed behavior of the consumer revealed that the ineffectiveness of the rules was mainly explained by the consumer being affected by unconscious and affective processes and the consumer’s inability to activate the conscious cognitive processes and valuate costs and benefits. These findings together with the aim of the legal policy concerns showed that the possibility of meeting the legal policy concerns underlying the consumer law depends on the legal policy concerns’ dependency on the behavior of consumers. The conclusion of this thesis is that such dependency was not found in regards to the legal policy concern of consumer protection and thus, that it is possible to meet this concern from a neuroeconomic perspective. In contrast the legal policy concern of consumer information to a high degree depends on the behavior of the consumer. Due to consumer difference as well as rationality and irrationality being situation dependent it will be possible to meet the concern is some situations but not in other.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2014
Number of pages93