Alexander Morell

Sticky Rebates: Target Rebates Induce Non-Rational Loyalty in Consumers

Competition policy often relies on the assumption of a rational consumer, although other models may better account for people’s decision behavior. In three experiments, we investigate the influence of loyalty rebates on consumers based on the alternative Cumulative Prospect Theory (CPT), both theoretically and experimentally. CPT predicts that loyalty rebates could harm consumers by impeding rational switching from an incumbent to an outside option (e.g., a market entrant). In a repeated trading task, participants decided whether or not to enter a loyalty rebate scheme and to continue buying within that scheme. Meeting the condition triggering the rebate was uncertain. Loyalty rebates considerably reduced the likelihood that participants switched to a higher-payoff outside option later. We conclude that loyalty rebates may inflict substantial harm on consumers and may have an underestimated potential to foreclose consumer markets.

The Short Arm of Guilt: Guilt Aversion Plays Out More Across a Short Social Distance

In a laboratory experiment, I test whether guilt aversion, i.e., a preference to fulfill other people’s expectations, plays out stronger if agents are socially close. I induce two different minimal group identities in participants and randomly assign participants to one of two treatments. Senders either play a dictator game with a receiver from their own group (ingroup treatment) or from the other group (outgroup treatment). I let senders condition their amount sent on second-order beliefs. I find that, in the realm of realistic beliefs (i.e., the sender expects the receiver to expect the sender to send no more than half of the pie), the positive influence of second-order beliefs on how much the sender sends is stronger in the ingroup treatment. In both treatments, about half of the senders remain unaffected by second-order beliefs. In the ingroup treatment, unaffected senders identify less with their group than affected senders do. This is not true for the outgroup treatment.  Max Planck Institute for Research on Collective Goods, Bonn. Comments are welcome and can be sent to morell@coll.mpg.de. I thank Christoph Engel, Susann Fiedler, Sebastian Goerg, Oliver Kirchkamp, Anna Kochanova, Michael Kurschilgen, and Franziska Tausch, as well as the participants of a workshop at the University of Cologne for helpful discussions and comments on earlier versions of the paper.In a laboratory experiment, I test whether guilt aversion, i.e., a preference to fulfill the expectations of others, plays out more strongly if agents share an induced social identity. Participants play a dictator game in which they can condition their amount sent on recipients’ beliefs. Dictators either play with a recipient from their own group (ingroup treatment) or from the other group (outgroup treatment). I find that the positive influence of second-order beliefs on how much a dictator sends is stronger in the ingroup treatment. However, the way dictators react to very high expectations does not differ significantly between treatments. In contrast to previous work I do not find that amounts sent are an inversely u-shaped function of recipients’ expectations. Rather, and independently of the treatment, participants tend to ignore very high expectations.

Gefahr erkannt, Gefahr gebannt? Ist eine Abfindung beim regulären Delisting aus Effizienzsicht überhaupt geboten?

Zusammenfassung Der Aufsatz untersucht, ob die nun eingeführte Pflicht zum Abfindungsangebot als Voraussetzung des Börsenrückzugs unter Effizienzgesichtspunkten empfehlenswert erscheint. Im Ergebnis ist das zu bejahen. Nach abstrakten Überlegungen löst die neue Regelung einen Konflikt zwischen Hauptaktionär und Minderheitsaktionären: Die Vor- und Nachteile des Börsenrückzugs treffen die beiden Aktionärstypen unterschiedlich. Die Parteien können den Konflikt aufgrund von Informationsasymmetrien, Koordinationsproblemen und weiteren, auch durch das Recht erzeugten Kosten nicht durch Verhandlungen lösen. Die seit dem Frosta-Beschluss erstellten empirischen Studien sind für die Feststellung eines Regelungsbedarfs nur von eingeschränktem Nutzen. Sie beruhen auf einer verzerrten Stichprobe, schauen allein auf den Aktienkurs, der die Vorteile des Hauptaktionärs nicht sicher abbildet, und können nicht ausschließen, dass der Kurs nur durch negative Information über das Unternehmen bewegt wird, die beim Delisting an den Markt gerät. Das Instrument der Abfindung gewährleistet die Lösung des Konflikts im Vergleich zu einem Hauptversammlungsbeschluss oder einer Entschädigungslösung wirksam und Transaktionskosten sparend. Für die Überprüfung des Gesetzes in zwei Jahren könnte man untersuchen, ob eine Trennung des Publizitätsregimes vom Handelsplatz sinnvoll ist und ob Unternehmen ohne Ankeraktionär von der Pflicht zum Angebot einer Abfindung ausgenommen werden könnten.

The Interrelation of Transparency and Availability of Collateral: German and Belgian Laws of Non-Possessory Security Interests

This article compares German and Belgian laws with regard to security interests in corporeal movables, economically analysing the differences to reach a normative conclusion. Belgium is currently implementing a major reform in this field, which, combined with the different stance of both regimes on transparency of security interests, begs the question of whether the Belgian reform could serve as an example to Germany. This article starts by comparing the evolutions both legal systems have undergone in the last century and which have started from opposite positions. While Belgium principally opposed non-possessory security interests for fear that this would annihilate transparency, Germany allowed for a broad system of non-possessory security interests through retentions or transfers of title, without any kind of publicity. Both systems underwent significant changes, which can roughly be divided into two categories: allowing for a floating charge on the business and reacting to business’ legal innovations. These evolutions brought into focus the trade-off that used to exist between transparency and extension of the collateral base. These legal evolutions have set the stage for reform in Belgium, a reform that is based on the principle of register publicity of security interests. Next, this article explores the threat posed to non-possessory security interests by the possibility of acquisitions in good faith, in both regimes. Following the legal comparison, this article analyses the identified differences from an economic point of view, finding three key areas in which transparency can be beneficial. First, transparency reduces the social cost of using secured credit. Second, it makes collateral more effective in performing its function by reducing the scope for acquisitions in good faith taking precedence over security interests. Finally, transparency can also make collateral more effective by optimizing the functioning of the floating charge. In its final part, the article briefly goes into the challenges posed by setting up register publicity, more specifically with regard to privacy issues and gatekeeping. This article concludes that now that technology allows for transparency and the collateral base to be complements, economically speaking, Germany could, in fact, benefit from a reform following the Belgian model.

Beware of Broken Windows! First Impressions in Public-Good Experiment

Broken Windows: the metaphor has changed New York and Los Angeles. Yet it is far from un-disputed whether the broken windows policy was causal for reducing crime. In a series of lab experiments we put two components of the theory to the test. We show that first impressions and early punishment of antisocial behaviour are independently and jointly causal for cooperativeness. The effect of good first impressions and of early vigilance cannot be explained with, but adds to, participants’ initial level of benevolence. Mere impression management is not strong enough to maintain cooperation. Cooperation stabilizes if good first impressions are combined with some risk of sanctions. Yet if we control for first impressions, early vigilance only has a small effect. The effect vanishes over time.