An Economic Analysis of Consumer Law : Three Essays

Consumers have bounded rationality and exhibit cognitive biases. The thesis studies the consequences of such biases on consumer choice and implications on consumer policy. Each chapter of the thesis investigates one specific bias (quality bias, utility misperception and projection bias) in a
given market structure. The first two chapters focus on stan- dard duopoly models, in which cognitive biases are incorporated: I build a horizontally differentiated duopoly based on Dixit (1979) in chapter 1, and a vertically differentiated duopoly inspired by Gabszewicz & Thisse (1979) in chapter 2. As for the third chapter, it extends to three periods, in a monopolistic framework, the projection bias model proposed by Loewenstein et al. (2003).
I come to the conclusion that, while cognitive biases sometimes lead to suboptimal consumption decisions (chapters 1 and 2), naive consumers can be better off than their sophisticated counterparts (chapter 3). This observation pleads in favor of a non-systematic and context dependant legal intervention to counter cognitive errors. I argue in favor of a new approach of consumer policy, that would focus less on information disclosures in favor of debiasing schemes. Examples of such debiasing policies are discussed throughout the thesis.