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The consumer scam: an agency-theoretic approach

Pouryousefi, Sareh; Frooman, Jeff

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Sareh Pouryousefi

Jeff Frooman


Despite the extensive body of literature that aims to explain the phenomenon of consumer scams, the structure of information in scam relationships remains relatively understudied. The purpose of this article is to develop an agency-theoretical approach to the study of information in perpetrator-victim interactions. Drawing a distinction between failures of observation and failures of judgement in the pre-contract phase, we introduce a typology and a set of propositions that explain the severity of adverse selection problems in three classes of scam relationships. Our analysis provides a novel, systematic explanation of the structure of information that facilitates scam victimisation, while also enabling critical scrutiny of a core assumption in agency theory regarding contract design. We highlight the role of scam perpetrators as agents who have access to private information and exercise considerable control over the terms and design of scam relationships. Focusing on the consumer scam context, we question a theoretical assumption, largely taken for granted in the agency literature, that contact design is necessarily in the purview of the uninformed principal.

Journal Article Type Article
Acceptance Date Feb 7, 2017
Online Publication Date Mar 7, 2017
Publication Date 2019-01
Deposit Date Mar 16, 2017
Publicly Available Date Mar 16, 2017
Journal Journal of Business Ethics
Print ISSN 0167-4544
Electronic ISSN 0167-4544
Publisher Springer Verlag
Peer Reviewed Peer Reviewed
Volume 154
Issue 1
Pages 1-12
Keywords Consumer scam, Fraud, Agency theory, Information asymmetry, Adverse selection, Contract design
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