Friday 23 March 2012

Seduced by plastic... or not?

On the 20th of April, the Amsterdam Center for Law and Economics (ACLE) organizes a conference on Behavioral Competition & Regulation. A brief introduction to the topic can be found on their website:

'Much of competition policy and regulation is based on insights from economic models with rational decision-makers. Yet a substantial body of research shows that many individuals are better characterized as being boundedly rational. In consumption choices as well as contexts that resemble executive decisions, people display such deviations from rationality as time inconsistency, overweighting of small probabilities, and failure to ignore sunk costs. Where one side of a market is not fully rational, the other side tailors its behavior accordingly. For instance, credit card companies may impose attractive baseline repayment terms combined with large penalties for late payments. This will attract borrowers that are time inconsistent and not sophisticated enough to foresee their temptations. That is, business strategies may display non-standard features, which regulators and competition authorities need to understand to be effective.

This year’s ACLE Competition & Regulation Meeting focuses on what we can learn from behavioral economics for the enforcement of competition law and regulation.'

This promises to be an interesting event for anyone with an interest in behavioral economics and law. In particular, issues of consumer credit deserve to be further explored. US literature is much further ahead in comparison to Europe: interesting work on this has been done by Oren Bar-Gill. For a selection of his articles, see ssrn. The ACLE conference could be a good starting point for research and discussion on the EU consumer credit market.