The EU Consumer Policy on the Digital Market: A Behavioral Economics View

Nowadays, the Internet is of great importance for peoples’ lives. People use it to make up their mind and improve their daily actions. The concept of shopping was inevitably affected, as well. E-commerce has many positive effects on both buyers and sellers, thus consumers could have saved a lot of time and money if they were more well-informed and less biased about purchases on the web.

According to a report by Nielsen titled ‘Trends in Online Shopping a global Nielsen consumer report’ (2008, p.1):

“According to a recent global survey conducted by The Nielsen Company, over 85 percent of the world’s online population has used the Internet to make a purchase, up 40 percent from two years ago, and more than half of Internet users are regular online shoppers, making online purchases at least once a month.’’

Even though these global figures are constantly rising, Europe is not close to leading the race yet. Therefore, European Commission is still trying to figure out the problems that EU consumers face in purchasing online, in the ‘European Consumer Agenda (2012), titled ‘A European Consumer Agenda – Boosting Confidence and Growth’, in which the European Consumer Policy is debated.

According to page 5 of this Agenda:

“E-commerce can deliver considerable welfare gains since consumers have at least twice the choice when shopping online rather than offline. Cloud computing in particular can offer more flexible services that are device or platform independent. It has been calculated that, if e-commerce in goods reaches 15 % of retail sales and all Single Market barriers are removed, the overall gain for consumers would be around EUR 204 billion (1.7 % of EU GDP).”

In this document, the European Commission describes, amongst other issues, the problems that arose in the 21^st century because of economic and societal changes in the European area, as well as the solutions they suggest. Such issues are the ‘digital revolution’ (which has already been mentioned), the social exclusion, and the knowledge deficit of the European consumers.

All these problems and their suggested solutions are related, and could be explained by the principals of Behavioral Economics. Three of them will be highlighted in this article.

The Power of Habits

According to the European Consumer Agenda (2012, p.5):

“The internet has fundamentally changed the way consumers shop and businesses advertise and sell their goods and services. It has created innovative ways of organizing, accessing, sharing and evaluating information”

Based on both of aforementioned quotes, it seems that a large increase of digital purchases would have a significant positive impact for European consumers, but there’s a lack of motivation for them to do so.

Behavioral sciences could shed light, in that case, on one of the cognitive effects, which is mainly based on psychology, Default Bias. Default Bias suggests that humans usually choose the default option that is available to them, in order to avoid the discomfort of complex choices.

That’s basically the bias that the European consumers fall into. Even though the positive aspects of e-commerce, such as discounts, saving time or finding stuff which are available only via the web, are quite measurable and can be enjoyed in a recurring manner, yet consumers tend to continue making purchases in conventional ways, unsophisticatedly avoiding to do research or change their habits.