European Master in Law & Economics (original) (raw)

2011

Abstract

Cooling-off periods are universally employed in doorstep selling regimes. Paired with a right for consumers to withdraw from the contract, this legal instrument is supposed to protect consumers against superior skilled and knowledgeable sellers thus restoring the balance of interests. According to prior literature, cooling-off periods also serve an economic function by moderating the abuse of market power, by mitigating problems of hidden characteristics, and by promoting consumer choice. If their drawbacks – mainly the creation of consumer moral hazard and shifting of risk to the seller – can be contained, cooling-off periods are hence supposed to yield efficiency gains. By thinking out of this box, the present paper showcases that coolingoff periods also establish the perverse incentive for the seller to increase consumer compliance to a level which outlasts the cooling-off period. I argue that inevitably occurring psychological factors and transaction costs from the cooling-off r...

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