Skip to main content

Good Consumer Information: the Information Paradigm at its (Dead) End?

Abstract

The traditional information paradigm postulates that increasing the amount of information and establishing full transparency help consumers with their decisions. We challenge this assumption and address criteria that good consumer information needs to fulfil. Based on the findings from research in behavioural economics and finance, necessary conditions for good consumer information include transparency, comprehensibleness, and comparability, whereas quality—in terms of clarity, fit to personal needs, and verifiability—represents the sufficient condition for good consumer information. Information that consumers currently receive hardly fulfils these conditions which, in turn, considerably hampers the trustworthiness and usability of this information. To mitigate consumers’ information problem and to recover the idea of the information paradigm, we suggest to extend the information model and to integrate the idea of collective consumers, to establish product testing principles, and to implement controlled minimum standard for (financial) products.

This is a preview of subscription content, access via your institution.

Notes

  1. 1.

    Please note that in the following we will use the term financial products to characterize both financial products and services.

References

  1. Baron, J. (2000). Thinking and deciding (3rd ed.). New York: Cambridge University Press.

    Google Scholar 

  2. Bateman, H., Eckert, C., Geweke, J., Louviere, J., Satchell, S., & Thorp, S. (2014). Financial competence, risk presentation and retirement portfolio preferences. Journal of Pension Economics and Finance, 13, 27–61.

    Article  Google Scholar 

  3. Bordalo, P., Gennaioli, N., & Shleifer, A. (2013). Salience and consumer choice. Journal of Political Economy, 121, 803–843.

    Article  Google Scholar 

  4. Drescher, L. S., Roosen, J., & Marette, S. (2014). The effects of traffic light labels and involvement on consumer choices for food and financial products. International Journal of Consumer Studies, 38, 217–227.

    Article  Google Scholar 

  5. Drexler, A., Fischer, G., & Schoar, A. (2014). Keeping it simple: Financial literacy and rules of thumb. American Economic Journal: Applied Economics, 6, 1–31.

    Google Scholar 

  6. Godwin, A., & Ramsay, I. (2015). Financial products and short-form disclosure documents: A comparative analysis of six jurisdictions. Capital Markets Law Journal, 10, 212–238.

    Article  Google Scholar 

  7. Hyland, M., & Birrell, J. (1979). Government health warnings and the “boomerang” effect. Psychological Reports, 44, 643–647.

    Article  Google Scholar 

  8. Jin, G., Luca, M., & Martin, D. (2015). Is no news (perceived as) bad news? An experimental investigation of information disclosure. Working paper.

  9. Kaas, K. P. (1995). Einführung: Marketing und Neue Institutionenökonomik. Zeitschrift für betriebswirtschaftliche Forschung zfbf, Special Issue, 35, 1–17.

    Google Scholar 

  10. Kaas, K. P., & Severidt, K. (2002). Neue Preismodelle in der Kapitalanlageberatung der Banken? Journal of Business Economics, 72, 619–640.

    Google Scholar 

  11. Kahneman, D. (2003). A perspective on judgement and choice. American Psychologist, 58, 697–720.

    Article  Google Scholar 

  12. Kahneman, D., & Tversky, A. (1973). On the psychology of prediction. Psychological Review, 80, 237–251.

    Article  Google Scholar 

  13. Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47, 263–291.

    Article  Google Scholar 

  14. Malhotra, N. K. (1984). Reflections on the information overload paradigm in consumer decision making. Journal of Consumer Research, 10, 436–440.

    Article  Google Scholar 

  15. McDonald, R. L., & Rietz, T. A. (2014). Ratings and asset allocation: An experimental analysis. Working paper, Northwestern University and University of Iowa.

  16. Micklitz, H.-W. (2003). The necessity of a new concept for the further development of the consumer law in the EU. German Law Journal, 4, 1043–1064.

    Google Scholar 

  17. Micklitz, H.-W. (2004). The principles of European contract law and the protection of the weaker party. Journal of Consumer Policy, 27, 339–356.

    Article  Google Scholar 

  18. Micklitz, H.-W. (2013). Jenseits des Informationsparadigmas – ein Plädoyer für ein soziales Verbraucherrecht. Friedrichshafen: Invited Talk.

    Google Scholar 

  19. Miller, G. A. (1956). The magical number seven, plus or minus two: Some limits to our capacity for processing information. Psychological Review, 63, 81–97.

    Article  Google Scholar 

  20. Oehler, A. (2011). Behavioral Economics und Verbraucherpolitik: Grundsätzliche Überlegungen und Praxisbeispiele aus dem Bereich Verbraucherfinanzen. Journal of Banking and Financial Research/BankArchiv. Zeitschrift für das gesamte Bank- und Börsenwesen, 59, 707–727.

    Google Scholar 

  21. Oehler, A. (2012). Die Verbraucherwirklichkeit: Mehr als 50 Milliarden Euro Schäden jährlich bei Altersvorsorge und Verbraucherfinanzen. Befunde, Handlungsempfehlungen und Lösungsmöglichkeiten. Study for Bündnis 90 Die Grünen, Berlin/Bamberg, December 2012.

  22. Oehler, A. (2013). Neue alte Verbraucherleitbilder: Basis für die Verbraucherbildung? Haushalt in Bildung und Forschung HiBiFo, 2, 44–60.

    Google Scholar 

  23. Oehler, A. (2014). Testen der Tester? Grundsätze ordnungsgemäßen Testens! Wirtschaftsdienst. Zeitschrift für Wirtschaftspolitik, 94, 444–447.

    Google Scholar 

  24. Oehler, A. (2015). Good consumer information: The information paradigm at its (dead) end? Invited Talk, Workshop “Where is law going if it is not going behavioral?”, Florence, Italy: European University Institute, EUI.

  25. Oehler, A. (2016). Verbraucherinformation und Verbraucherbildung. In P. Kenning, A. Oehler, L. Reisch, & C. Grugel (Eds.), Verbraucherwissenschaften – Rahmenbedingungen, Forschungsfelder und Institutionen (forthcoming). Wiesbaden: Springer Gabler.

  26. Oehler, A., & Reisch, L. (2008). Behavioral Economics – Eine neue Grundlage für die Verbraucherpolitik? Berlin: A study for Verbraucherzentrale Bundesverband (vzbv).

    Google Scholar 

  27. Oehler, A., & Unser, M. (2002). Finanzwirtschaftliches Risikomanagement (2nd ed.). Berlin: Springer.

    Book  Google Scholar 

  28. Oehler, A., Rummer, M., & Wendt, S. (2008). Portfolio selection of German investors: On the causes of home-biased investment decisions. Journal of Behavioral Finance, 9, 149–162.

    Article  Google Scholar 

  29. Oehler, A., Kohlert, D., & Jungermann, H. (2009). The quality of financial investment advice for private investors: problems in the advice process and potential solutions. Berlin: Statement by the scientific advisory council on consumer and food policy at the Federal Ministry for Food, Agriculture and Consumer Protection (BMELV).

  30. Oehler, A., Höfer, A., & Wendt, S. (2014a). Do key investor information documents enhance retail investors’ understanding of financial products? Empirical evidence. Journal of Financial Regulation and Compliance, 22, 115–127.

    Article  Google Scholar 

  31. Oehler, A., Höfer, A., Horn, M., & Wendt, S. (2014b). Do mutual fund ratings provide valuable information for retail investors? Empirical evidence on ratings non-persistence and the risk of mutual fund closure. Bamberg: Working Paper.

    Google Scholar 

  32. Oehler, A., Horn, M., & Wendt, S. (2016). Benefits from social trading? Empirical evidence for certificates on Wikifolios. International Review of Financial Analysis, 46, 202–210.

    Article  Google Scholar 

  33. Plous, S. (1993). The psychology of judgement and decision making. New York: McGraw-Hill.

    Google Scholar 

  34. Richter, R. (1998). Neue Institutionenökonomik: Ideen und Möglichkeiten. Zeitschrift für Wirtschafts- und Sozialwissenschaften, Special Issue, 6, 323–355.

    Google Scholar 

  35. Rouette, C. P. (2005). Die Asset Allokationsentscheidung deutscher Privatinvestoren – Empirie und Konsequenzen für die Anlageberatung. Lohmar: EUL.

    Google Scholar 

  36. Selten, R. (1990). Bounded rationality. Journal of Institutional and Theoretical Economics, 146, 649–658.

    Google Scholar 

  37. Simon, H. A. (1955). A behavioral model of rational choice. Quarterly Journal of Economics, 69, 99–118.

    Article  Google Scholar 

  38. Simon, H. A. (1956). Rational choice and the structure of environments. Psychological Review, 63, 129–138.

    Article  Google Scholar 

  39. Skurnik, I., Yoon, C., Park, D. C., & Schwarz, N. (2005). How warnings about false claims become recommendations. Journal of Consumer Research, 31, 713–724.

    Article  Google Scholar 

  40. Steinhart, Y., Carmon, Z., & Trope, Y. (2013). Warnings of adverse side effects can backfire over time. Psychological Science, 24, 1842–1847.

    Article  Google Scholar 

  41. Sunstein, C. R. (2014a). The ethics of nudging. Boston, MA: Working Paper, Harvard University.

    Google Scholar 

  42. Sunstein, C. R. (2014b). Nudging: A very short guide. Journal of Consumer Policy, 37, 583–588.

    Article  Google Scholar 

  43. Torres, I. M., Sierra, J. J., & Heiser, R. S. (2007). The effects of warning-label placement in print ads: A social contract perspective. Journal of Advertising, 36(2), 49–62.

    Article  Google Scholar 

  44. Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185, 1124–1131.

    Article  Google Scholar 

  45. Tversky, A., & Kahneman, D. (1981). The framing of decisions and the psychology of choice. Science, 211, 453–458.

    Article  Google Scholar 

Download references

Acknowledgements

This article is based on Oehler (2015). We would like to thank Hans-W. Micklitz, Lucia Reisch, Joasia Luzak, Peter Kenning, Alberto Alemanno, Fernando Gómez (the editor), two anonymous referees and participants of the workshop “Where is law going if it is not going behavioural?” held at the European University Institute, EUI, Florence, Italy on January 22/23, 2015 for inspiring discussion and helpful comments and suggestions. All remaining errors are our own.

Author information

Affiliations

Authors

Corresponding author

Correspondence to Andreas Oehler.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Oehler, A., Wendt, S. Good Consumer Information: the Information Paradigm at its (Dead) End?. J Consum Policy 40, 179–191 (2017). https://doi.org/10.1007/s10603-016-9337-5

Download citation

Keywords

  • Consumer information
  • Information model
  • Behavioural finance
  • Consumer research
  • Household finance
  • Personal finance
  • Information paradigm