This chapter addresses the question how the average consumer benchmark relates to actual consumer behaviour as understood by the behavioural sciences. It first identifies two general assumptions underlying the average consumer benchmark (paragraph 9.2), followed by a discussion of those assumptions from a behavioural perspective , using insights from the field of consumer behaviour and behavioural economics (paragraph 9.3).¹ The focus is on the benchmark as applied at the European level, as this is the legal framework that is subject to the assessment provided in Chap. 11 of this book.

According to the CJEU , the average consumer is ‘reasonably well informed and reasonably observant and circumspect’.² This description in itself does not clarify what behaviour is or should be assumed in relation to this benchmark. As has been shown in Chaps. 3 and 4 of this book, the application of the average consumer benchmark and the guidelines for application do not always provide a consistent image of what is expected of the average consumer’s behaviour.

Still, there are two prominent assumptions with regard to the behaviour of the average consumer that can be derived from European law, in particular from the CJEUs case law. The first is that the average consumer is often depicted as someone who takes well-considered purchasing decisions and who takes into account the information available.³ In Chap. 3 of this book, several examples of this have been provided in the CJEUs application of the benchmark, as well as in the Opinions of its Advocate Generals. For example, Advocate General Fennely in Lifting stated that ‘the assumption is that consumers will inform themselves about the quality and price of products and will make intelligent choices’.⁴ Moreover, the CJEU in the context of the labelling doctrine assumes the average consumer to read product labels and to bear in mind the information provided on those labels before making a purchasing decision.⁵ The image of the average consumer as a careful decision-maker arises most explicitly in the Opinion of Advocate General Trstenjak in Mediaprint, in which she argued that the consumer is expected to recognise the potential danger of certain trade practices and is expected to act rationally towards them.⁶ Although the image of the average consumer presented in European law is not entirely consistent (see for example the EC Guidance, which may leave more room for recognition of weaknesses in consumer behaviour), the conclusion can at least be drawn that many of the statements on the average consumer lean towards the image of a rational decision-maker .⁷ This is the first assumption that can be identified and that will be discussed in detail below.

Related to this first assumption is the idea underlying the Unfair Commercial Practices Directive and the case law of the CJEU that the benchmark of the average consumer, although in and of itself by definition an abstraction, is a suitable instrument to predict how consumers typically behave. The CJEU assumes that certain behaviour can be qualified as ‘reasonably observant and circumspect’ and that a certain level of ‘being informed’ can be qualified as being ‘reasonably informed’.⁸ The CJEU thus assumes that there is such a thing as ‘typical’ or ‘standard’ consumer behaviour and that, therefore, the average consumer benchmark reflects this behaviour. This is the second assumption that will be discussed below.

Please note that these assumptions may not always be views on how consumers actually behave; they may also reflect how consumers, according to European law, should behave.⁹ Still, it is important to test these assumptions against actual consumer behaviour, in order to gain insight into their impact on consumer protection as well as the other goals of the Directive.¹⁰

To what extent is the assumption of the consumer as rational decision-maker realistic? Important in this context is the well-known and long-standing discussion regarding the image of man as a rational agent, a discussion that has been held most notably in economics and in the behavioural sciences. This discussion points out that although the assumption of rational decision-making may provide a model of decision-making, it ignores the many mistakes people often structurally and thus predictably make.¹¹

Rationality in essence refers to a conscious decision-making process, in which advantages and disadvantages (i.e., costs and benefits) are carefully weighed in order to reach the optimal decision. As psychologist Jacoby states, ‘rationality implies decision-making that is a function of the deliberate conscious consideration and evaluation of information.’¹²

Since the 1970s, psychologists have strongly criticised this idea of rational decision-making. As is discussed in more detail below, extensive research shows that due to our limited cognitive abilities we cannot always act rationally, and that even if we can act rationally we often do not do so. Accordingly, people do not always make choices as consciously and deliberately as is assumed by rational choice theory. In fact, we often do not make choices as consciously and deliberately as is assumed. Moreover, these are not just random individual examples; people in general predicatively behave differently from this assumedly rational human being. The actual average consumer is thus by far not always a rational decision-maker .

Where does it go wrong? An important assumption underlying the idea of the rational decision-maker is that the consumer uses available information and, on the basis of this information, makes the right decision. This assumption can also be found in the CJEUs case law related to the average consumer benchmark, as has been shown earlier.

The fact that information is available, however, does not automatically mean that consumers will actually pay attention to that information, nor that they perceive and comprehend the information accurately.¹³ The competence of the consumer to collect and process information is limited. Moreover, there is the problem of information costs; is it worth to invest time and energy to gather and process information? In this sense, also motivation plays an important role in consumer behaviour. Consumers are not likely to be motivated to invest time in making a decision if it concerns a product of low value, whereas they may be more motivated to spend time making a decision for more expensive good.¹⁴

Many things can go wrong in the various stages of information processing, i.e., in the stages of attention, encoding and comprehension, inference, as well as in the response processes.¹⁵ Consumers not only encounter problems processing information regarding complex products such as those in the financial sector.¹⁶ Jacoby quotes research showing that, on average, television viewers and magazine readers miscomprehend approximately 20–25 % of the material meanings they read in magazines or see on television. He adds:¹⁷

Strikingly, this research shows that virtually 100 % of the population miscomprehends at least some portion of these “common denominator mass media” communications, and that this occurs regardless of the level of formal education. J.D.s, L.L.Ds and Ph.Ds miscomprehend material elements of these simple communications at nearly the same rates as do those whose formal education ended with high school diplomas or less. In similar fashion, research on product warning labels and disclaimers reveals that consumer attention to and comprehension of such information is far from optimal, often hovering in the range of 10 % to 20 %.

Exactly where it goes wrong in the processing of information is not always easy to ascertain, but consumer psychology has identified some important problems in this regard. One of these issues is the now well-known problem of information overload, i.e., the problem that consumers often prove to be unable to make adequate decisions when faced with a considerable amount of information. Hence, although consumers require sufficient information in order to facilitate their decision-making process, too much information distorts the same process.¹⁸ Providing more information may thus be counterproductive.¹⁹

Consumers also make mistakes because of so-called cognitive biases, i.e., typical and predictable irrational thought processes or results of thought processes. Experiments indicate that consumers, because they have to deal with the fact that they do not always possess full information and have limited cognitive abilities in evaluating this information, use so-called mental shortcuts or heuristics. These mental shortcuts or heuristics are often very useful, enabling consumers to make quick and relatively reliable decisions.²⁰ Heuristics provide consumers with a possibility to evaluate choices and subsequently select from alternatives in a simple, flexible and easily adapted way.²¹ However, heuristics also have their difficulties. In fact, extensive research shows that certain mental shortcuts are seriously flawed, causing people to structurally incur cognitive errors in their decision-making. These cognitive errors are also known as biases.²²

One of the most well-known biases is related to the so-called framing effect.²³ Experiments in the 1980s by psychologists Tversky and Kahneman show that differently designed but essentially identical options lead to distinctly different choices by consumers.²⁴ Framing can help to draw consumers’ attention to important information, but the opposite can also be achieved. A good example of this is the decoy effect, of which Ariely has provided an example for consumer behaviour.²⁵ He shows that adding an option, which at first sight would appear irrelevant, can radically change the perceived value of other options. The options in his experiment concern a subscription to the Economist. One group of test subjects has two options: (a) an online-only subscription to the Economist for $ 59,- or (b) a print subscription to the Economist combined with an online subscription for $ 125,-. Another group has the same options (a) and (b), but with a worthless and thus seemingly irrelevant additional option of a print subscription of $ 125,-, i.e. the same price as the combined subscription (b). None of the subjects choose the extra option, but the distribution for the choice for options (a) and (b) suddenly changes dramatically; in the first group, 68 % of the respondents choose the online-only subscription, with 32 % opting for the combined subscription, whereas in the second group only 16 % opted for the online-only subscription, and 84 % the combined subscription. This shows that the way in which options are presented can strongly influence consumer choice and that this choice is less rational than one would expect, as it can be steered by seemingly irrelevant external factors.

Another problem in consumer decision-making is that consumers often have difficulties estimating the chances of future events. Lacking accurate information, people use heuristics to make estimations. As already noted, these heuristics are often useful tools, but also necessarily involve associated flaws. For example, in estimating the chance of future events, people tend to rely too much on the availability of these events in one’s own memory. Accordingly, people tend to overestimate the chance of events that have happened recently or that are otherwise readily available in their own memory. People also tend to be structurally over-optimistic about their own future.²⁶ This overly optimistic outlook increases the chance that people overestimate their chances to repay a loan, or make them too readily believe that they will be able to save up money for retirement at a later stage in their life.

These examples illustrate that the image of the average consumer as a rational decision-maker is problematic from a behavioural perspective .²⁷ Consumer decision-making is subject to a range of predictable problems. These flaws in the decision-making process make consumers vulnerable to deceptive marketing strategies, exactly because the flaws are predictable. This means that traders can (and do) design their marketing strategies in order to profit from these flaws.²⁸