Unintended Consequences: An Experimental Investigation of the (In)Effectiveness of Mandatory Disclosures

Abstract

Nearly everyone who purchases a product that offers a mail-in rebate intends to redeem the rebate. Yet most consumers, including those who purchased the product because of the mail-in rebate, never submit the materials required to receive their rebates. Thus, prominent legal scholars propose requiring rebate offers to disclose actual redemption rates. The idea, of course, is that such disclosures will improve consumers’ purchase decisions by causing consumers to realize that they too are unlikely to redeem rebates. But is this what would really happen? We report the results of a controlled experiment that examines the effects of such disclosures on U.S. consumers. Surprisingly, we find that these disclosures backfire, increasing rather than decreasing consumers’ willingness to purchase rebated products. We discuss how our experimental results inform both the rebate debate and the more general debate about the likely success of other non-restrictive legal interventions.

Keywords: rebate, consumer protection, regulation, disclosure, behavioral economics, empirical legal studies, experimental legal studies