The consumer scam: an agency-theoretic approach

Pouryousefi, Sareh; Frooman, Jeff

Abstract

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.

Citation

Pouryousefi, S., & Frooman, J. (2019). The consumer scam: an agency-theoretic approach. Journal of Business Ethics, 154(1), 1-12. https://doi.org/10.1007/s10551-017-3466-x

• 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: 1573-0697
• Publisher: Springer Verlag
• Peer Reviewed: Peer Reviewed
• Volume: 154
• Issue: 1
• Pages: 1-12
• DOI: https://doi.org/10.1007/s10551-017-3466-x
• Keywords: Consumer scam, Fraud, Agency theory, Information asymmetry, Adverse selection, Contract design
• Public URL: https://nottingham-repository.worktribe.com/output/848884
• Publisher URL: http://link.springer.com/article/10.1007/s10551-017-3466-x
• Contract Date: Mar 16, 2017