Fulfillment of Consumer Rights with Behavioral Economic
Economic and technological developments trigger an increase in supply and demand for goods and services. Currently, consumers are treated to various conveniences in shopping because the center of business attention lies in customer satisfaction and loyalty. However, this does not guarantee that consumer rights are properly fulfilled and protected. The Ministry of Trade of the Republic of Indonesia (Kemendag RI) released data that the most consumer complaints were in electronic commerce (e-commerce) (Kompas, January 14, 2011). Technological advances and increased activity at home during the pandemic are some of the factors causing the increasing number of electronic transactions that also contribute to the increase in complaints. These problems can be explained and prevented by using behavioral economics.
Consumer Problems
The Ministry of Trade of the Republic of Indonesia reports that complaints about electronic commerce received consist of cancellations of airline tickets, goods not as displayed, consumers not receiving goods, goods arriving late, and unilateral cancellations of business actors. All of these problems are related to information that is not equal (asymmetrical) between the seller and the buyer in terms of price, quality, or warranty. In his article, Nobel Prize in Economics winner George Akerloff (1970) illustrated the market for used cars. The seller certainly has more detailed information about the used cars he sells. Information about the condition of the engine, suspension, and accident track record. The seller has an incentive to cover or not provide all information regarding the used car being sold. This is because the buyer does not necessarily understand the ins and outs of the car so the seller can take more even though the condition of the car is not good.
In electronic transactions, consumers cannot see, try, and check directly the products they want to buy. This condition adds to the problem of unequal information between consumers and sellers in electronic transactions. The non-fulfillment of information equality has a negative impact on the individual entities as well as the public. For the individual side, consumers will get goods or services whose prices do not match the standards and quality. On the public side, Akerloff hypothetically stated that the bad impact of non-disclosure of information or dishonesty could make producers/sellers with good quality lose competition and leave the market. This condition in the long term can disrupt market conditions.
Behavioral economics
Behavioral economics helps to understand and find solutions so that consumers are wiser in fulfilling their rights as consumers. Behavioral economics can be a consideration and substance for the creation of policies that help consumers to reach their optimal point in the buying and selling process. Some policies based on behavioral economics that can be adopted to overcome these biases are:
1.Transparency or Information Disclosure
Publishing all the information that people can use to make decisions in the buying and selling process can be the first step. Important information about price, quality, and warranty period, to the protection of personal data in accordance with standards and conditions. The provision of information cannot be done simply. Consumers have limited ability to understand, analyze, and remember information in making decisions (bounded rationality). If the information provided is too much, consumers are likely not to read and understand everything. The limited ability to think makes it difficult for individuals to process too much information (information overload). For example, wholesale goods have a lot of sellers and information on price comparisons between sellers also overlaps, even making consumers confused, which is the most optimal price and quality. Providing information should be done very simply and if necessary use visual aids so that consumers can easily understand it.
2. Peer Reviews
Peers have an important influence on decision making. The opportunity for consumers to provide reviews on electronic transactions is an important need that is met by all electronic transaction locations (marketplaces or e-commerce). As consumers, we need to complete the information provided by the seller with peer information in the review column. In order for consumers to get complete review information, electronic transaction platforms need to also display and highlight criticisms, bad reviews, or important notes when consumers buy a product. This is to overcome the tendency of individuals to look for justifications to buy goods or services that we have wanted for a long time without further researching various other important information (self-serving bias).
3. Standard Settings (Default Rules)
Consumer protection can be carried out by marketplace or e-commerce platforms by applying regulatory standards for payments, guarantees, and refunds. Amazon is an example of a company that is quite good at protecting buyers or consumers. Consumers will be charged when the seller has reported the delivery of goods to Amazon. In addition, Amazon waits to send money to the seller for several days after the item is received by the buyer to open an opportunity for complaints about non-conformance or delays in the item. By such standards, the seller has no incentive to cheat. This policy is important to ensure the protection of all consumers because each individual has a risk perception bias towards the transactions he/she does. Some consumers may buy a product and are overly optimistic that the quality of the product and the integrity of the seller are as expected.
The development of the economy and the rapid development of technology to improve the efficiency of the buying and selling process can actually be balanced with the fulfillment of consumer rights. Inequality of information between sellers and buyers, and the biases that often occur is actually a long time ago. To overcome this, we not only need individuals to be wiser, but policies that accommodate by utilizing behavioral economics. Some of the policy solutions above are expected to help consumers in Indonesia to fulfill their rights and become wiser in consuming goods or services in the electronic market.
