Gaining Assurances

40 Pages Posted: 3 Apr 2013 Last revised: 11 Jul 2013

See all articles by Julia Y. Lee

Julia Y. Lee

Pennsylvania State University, Penn State Law

Date Written: December 1, 2012

Abstract

This Article explores alternative legal mechanisms for solving a type of coordination problem known as the Assurance Game. The traditional approach has been to focus on changing the expectations of the parties. This Article focuses on altering the underlying payoff structure — not through sanctions, but through risk-reducing mechanisms such as guarantees.

One type of risk-reducing mechanism is the conditional money-back guarantee. Conditional money-back guarantees operate in settings ranging from federal deposit insurance to daily deal websites such as Groupon and LivingSocial. In each of these, a promise is made to return an individual’s monetary contribution if an event or condition that depends on the actions of others is met. The condition may be (1) the reaching of a predetermined threshold, or (2) the happening of some event. This Article examines both types of conditional money-back guarantees and analyzes factors that may impact their effectiveness.

Keywords: assurance game, stag hunt, coordination, money-back guarantee, conditional, deposit insurance, FDIC, Groupon, daily deal, guarantee, payment

Suggested Citation

Lee, Julia Y., Gaining Assurances (December 1, 2012). Wisconsin Law Review, 2012; Penn State Law Research Paper No. 21-2013. Available at SSRN: https://ssrn.com/abstract=2242704

Julia Y. Lee (Contact Author)

Pennsylvania State University, Penn State Law ( email )

Lewis Katz Building
University Park, PA 16802
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
37
Abstract Views
489
PlumX Metrics