Emanuel Vahid Towfigh

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.

Game Over: Empirical Support for Soccer Bets Regulation

In many countries, betting in sports is highly regulated. In Germany, however, there are current debates whether regulation should be loosened. A crucial part of the argument is that sport bets could be qualified as ‘games of skill’ that are considered to be less dangerous by German Law than ‘games of chance’, and are thus assumed to need less regulation. We explore this hypothesis in three incentivized online studies on soccer betting (N=214) and provide evidence against two crucial parts of this argument. First, we show that there are no overall effects of skill on accuracy in soccer bets and monetary earnings do not increase with skill. Hence, soccer betting cannot be considered a game of skill. Second, we show that soccer betting induces strong overconfidence and illusion of control, particularly for people who assume they have high skill, and that these biases lead to increased betting. Cognitive biases that might cause financial harm for bettors or even lead to problematic or pathological gambling behavior are even stronger for soccer bets compared to bets on the outcome of lotteries. Concerning the main aims of legal regulation for gambling in German law, our results strongly speak for regulation of soccer bets.

Economic Methods for Lawyers

Responding to the growing importance of economic reasoning in legal scholarship, this innovative work provides an essential introduction to the economic tools, which can usefully be employed in legal reasoning. It is geared specifically towards those without a great deal of exposure to economic thinking and provides law students, legal scholars and practitioners with a practical toolbox to shape their writing, understanding and case preparation.

Dangerous Games: The Psychological Case for Regulating Gambling

The gambling market is growing rapidly, as is the number of gambling addicts. This is fueling the call for changes in regulation. Some regulators intend to enable the entertainment industry to fully harvest a market potential magnitudes larger than today’s gaming market by minimizing regulation. Others aim at further limiting games to reduce pathological gambling and to enhance consumer protection. Current legal doctrine subjects a game to restrictions if chance, rather than skill, is its predominant trait. This rests on the assumption that only games of chance are harmful. As our experimental study shows, this is wrong: if a notion of skill seems relevant for a game, players fall prey to psychological biases that are breeding grounds for addiction and economic exploitation. We therefore suggest to abandon the distinction between skill and chance, and to condition regulation instead on the psychological biases a game induces, i.e. on the danger it actually poses.The empirical part of the argument focuses on sports bets which are among the set of particularly controversial games, as there is contention whether skill or chance dominates the performance of bettors. Recent academic papers and court decisions argue that such games are properly categorized as games of skill, and as such should not fall afoul of current gambling laws. We show that, empirically, skill does have an — albeit extremely limited — impact on performance. However, the participants’ general assumption that skill does matter for performance makes them suffer an illusion of control and overconfidence, that as has been established in clinical research makes them highly vulnerable for excessive betting and pathological gaming behavior. We therefore suggest to subject sports betting to regulation.

Old Weimar meets New Political Economy: Democratic Representation in the Party State

The paper, based on a historic account of the theory of representation in German legal thought, seeks to understand what effect particracy has on democratic representation and thereby links a discourse dating back to the days of the Weimar Republic to the analytical approach to the political process as taken by New Political Economy. It is argued that the idea of representation cannot refer to the people’s will; if we wish to stick to it, we would need to specify what it refers to and how it ought to be designed. Secondly, it is shown that parliamentarians have significant incentives, even without parties, to pursue particular interests, and that these incentives become even more prominent in the party state. Thus, a representative concept of democracy cannot realistically refer to the representation of the entire people. Nor can an individual parliamentarian, a party or the entire parliamentary system be understood as representing the entire people.

Complexity and Normative Clarity - Or: Legal Statutes are Made for Lawyers

The paper deals with the complexity of legal norms and the instrument the German constitutional law establishes to control it, namely the requirement of normative clarity. First, I introduce a definition of complexity of written legal norms, conceptualized by their density (number of items to be considered) and interdependencies (within a norm and of different norms), thus focussing on the complexity of the underlying rule, rather than its language. Complexity is then described as a primarily cognitive problem, with reflexes on the time and monetary scales. The view taken here is therefore a subjective one, setting out from the individual who tries to understand a legal text. The technicality of a norm can reduce complexity for those trained in the law, and at the same time raise it for laypeople. Legal doctrine, too, aims at reinforcing consistence and reducing complexity. The requirement of normative clarity, however, is not a means to reduce complexity, but only to control it. Normative clarity is held to be founded in the principle of the separation of powers, and its measure is the executability of the law. Against concurrent views, I therefore argue that it is not the norms addressee who must understand the norm, but rather lawyers. Only then can the problem of legal complexity be handled in systems that rely heavily on statutory law. The argument is supported by theoretical, behavioural and doctrinal reasons.

Geschlechts- und Herkunftseffekte bei der Benotung juristischer Staatsprüfungen

In kaum einer anderen akademischen Disziplin sind Unterschiede in der Benotung der Examina von zentralerer Bedeutung für die Karrieremöglichkeiten und den Karriereerfolg der Absolventinnen und Absolventen wie in der Rechtswissenschaft. So wurde 2015 in einer empirischen Studie nachgewiesen, dass bereits kurz nach dem Studium ein erheblicher Gehaltsunterschied (14%) zwischen Personen mit einem Prädikatsexamen und solchen, die kein Prädikat erreichen konnten, besteht.1 Die Autoren führen dies — unter Berücksichtigung verschiedener Kontrollfaktoren — sowohl auf die Signalwirkung des Prädikats wie auch auf die damit verbundenen Karrieremöglichkeiten zurück. Die akademische Ausbildung an juristischen Fakultäten, die Prüfungsvorbereitung sowie die Rahmenbedingungen und Bewertungsprozesse in den Prüfungen sind auch deshalb kontinuierlich dahingehend zu überprüfen, ob sie den Ansprüchen an eine objektive und faire Ausbildung und Benotung entsprechen. Gerade das föderale System mit der Zuständigkeit der Länder für die juristischen Prüfungen wird dadurch herausgefordert, gleichwertige Bedingungen für Absolventinnen und Absolventen zu schaffen (vgl. § 5 d Abs. 1 S. 2 DRiG). Dass dies bislang nur unzureichend gelingt, zeigt auch eine aktuelle Untersuchung von Kähler, Engel und Ritter, die anhand einer Analyse der Examensergebnisse von Referendarinnen und Referendaren, welche das Bundesland gewechselt hatten, herausfanden, dass es bei den untersuchten zehn Bundesländern Unterschiede beim Schwierigkeitsgrad der zweiten juristischen Staatsprüfung gibt.2 In einem Umfeld, das einen besonderen Fokus auf die formale legt, können diese Unterschiede Auswirkungen auf das Fortkommen haben. Ist aber die konkrete Examensnote dermaßen entscheidend für Karriere und Einkommen, so sollte das auf diese Note hinführende Examen in besonderem Maße objektiver Gradmesser der tatsächlichen Fähigkeiten von Absolventinnen und Absolventen sein und gewährleisten, das gleiche Voraussetzungen auch zu gleichen Chancen auf gute Noten führen.

Ökonomische Aspekte der Durchsetzung des Verbraucherschutzrechts

Dieses Gutachten geht der Frage nach, ob sich im Verbraucherschutz die Erweiterung behordlicher Kompetenzen empfiehlt. In der Diskussion um „neue Wege in der Durchsetzung des Verbraucherrechts“ soll dieser Beitrag die okonomische Perspektive einnehmen. Ausgangspunkt der Untersuchung sind – neben der Schaffung und Ausweitung von behordlichen Ermittlungsbefugnissen – von der Behorde zu erhebende zivilrechtliche Unterlassungsklagen und behordliche Unterlassungsverfugungen. Daruber hinaus wird auch auf weitergehende Instrumente mit Sanktionscharakter eingegangen. Bei dem verbraucherschutzenden Recht, das damit durchgesetzt werden soll, handelt es sich um die Vorschriften des UWG, die der Umsetzung der Richtlinie 2005/29/EG gegen unlautere Geschaftspraktiken (UGP-RL) dienen, und den verbraucherschutzenden Vorschriften in §§ 305 ff. BGB, die der Umsetzung der Richtlinie 93/13/EWG (Klausel-RL) dienen. Das Gutachten bewertet die genannten Instrumente in Hinblick auf die Durchsetzung dieser Vorschriften. Masgeblich ist dabei eine Analyse nach okonomischen Kriterien. In methodischer Hinsicht handelt es sich um eine Literaturstudie.

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.

Does Political Representation through Parties Decrease Voters' Acceptance of Decisions?

Are decisions by political parties more or less accepted than direct-democratic decisions? The literature on parties as brand names or labels suggests that the existence of political parties lowers information and transaction costs of voters by providing ideological packages. Building on this important argument, we posit that this informational rationale for parties is not universally applicable and is contingent on the context of the decision that is made. Intermediary political decision-making institutions may impose additional costs on voters in situations where the decision is perceived to be personally important to the individual voter. We conduct an experimental online vignette study to substantiate these claims. The results imply that a combination of representative democracy and direct democracy, conditional on the distribution of issue importance among the electorate, is optimal with regard to acceptance of a decision.