The Law, Marketing and Behavioral Economics of Consumer Rebates
63 Pages Posted: 15 Nov 2006
This paper deals with the legal regulation of mail-in consumer rebates - a significant, yet controversial marketing practices that has generated thousands of consumer complaints, inspired countless articles in major periodicals, and begun to attract the interest of state and federal legislators. The paper first aims to provide an understanding of the purposes of consumer rebate offerings. It then surveys the main categories of consumer rebate complaints, including that firms impose onerous requirements to discourage rebate redemption and that they fail to pay rebate rewards in a timely manner. The paper then draws on recent marketing, psychological and behavioral economics research to address the potent claim that rebates exploit sub-optimal consumer behavior.
The latter part of the paper evaluates several possible regulatory options for consumer rebates, including unfair and deceptive trade practices litigation, informational or de-biasing laws aimed at reducing sub-optimal consumer behavior, and legislation that sets mandatory rebate promotion terms. The paper also discusses how the market has already begun to respond to consumer dissatisfaction with rebate promotions. In the end, the paper argues that the most egregious rebate promotion abuses can be managed with a minimum level of paternalistic intervention while preserving the welfare-enhancing benefits of rebate promotions.
Keywords: Rebates, consumer law, behavioral economics, unfairness, unfair and deceptive trade practices, price discrimination
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