Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/253659 
Year of Publication: 
2018
Publisher: 
ZBW – Leibniz Information Centre for Economics, Kiel, Hamburg
Abstract: 
Embedding consumer experimentation with a product or service into a market environment, we find that unregulated contracts induce too few returns or cancella tions, as they do not internalize a pecuniary externality on other firms in the market. Forcing firms to let consumers learn longer by imposing a commonly observed statutory minimum cancellation or refund period is socially efficient only when firms appropriate much of the market surplus, while it backfires otherwise. Interestingly, cancellation rights are a poor predictor of competition, as in the unregulated out come firms grant particularly generous rights when competition is neither too low nor too high.
Document Type: 
Working Paper

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