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Law, Psychology, and MoralityThe Role of Loss Aversion$
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Eyal Zamir

Print publication date: 2014

Print ISBN-13: 9780199972050

Published to Oxford Scholarship Online: November 2014

DOI: 10.1093/acprof:oso/9780199972050.001.0001

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Consumer Behavior

Consumer Behavior

Chapter:
(p.55) 2 Consumer Behavior
Source:
Law, Psychology, and Morality
Author(s):

Eyal Zamir

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199972050.003.0002

This chapter focuses on the exploitation of consumers’ loss aversion by suppliers. One example is the effect of different framings of price and other attributes on consumer decisions (for example, cash discounts versus surcharges for credit). The chapter also examines how the limited availability of goods influences purchase decisions. It argues that escalation of commitment is one explanation for consumers’ failure to read standard-form contracts, and for the effectiveness of “low ball” and “bait-and-switch” marketing techniques. It explains why liberal return policies are a double-edged sword, given customers’ endowment effect. Finally, it draws attention to how suppliers exploit consumers’ status quo and omission biases to the suppliers’ advantage.

Keywords:   consumer behavior, cooling-off period, credit cards, endowment effect, limited availability, marketing, framings of price, return policy, scarcity, standard-form contracts

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