Dark Patterns and the Economics of Consumer Mistakes

Do you ever feel manipulated by websites you visit?  You think you’re about to get a deal on a purchase, and then things get complicated.  All of a sudden, the site appears to be steering you toward more expensive packages or trying to convince you to select add-ons and accessories.  Sometimes, you go through with buying the more expensive things because it is difficult to go back to your original purchase.  You may have just fallen prey to dark patterns in website design, used by sellers to manipulate you.  

Dark Patterns Explained

Dark patterns are designs and features, typically on websites and apps today, that intentionally attempt to guide prospective customers toward specific choices.  Researchers of dark patterns combine psychology and economics, which is the field known as behavioral economics: how are consumers at the micro (individual) and macro (society-wide) levels influenced to spend more or less money?  Regulators like the Federal Trade Commission (FTC) in the United States have found that dark pattern use by online sellers is common, with roughly 11 percent definitively using such practices as of 2024.

The goal of dark patterns is to manipulate customers into spending more money, often through guiding them to more expensive options, such as larger sizes or more comprehensive packages.  Websites and apps are designed to make it very easy to select upgrades and add-ons, but difficult to remove them or get to the “checkout” page without having to navigate through demands for such upgrades and add-ons.  Consumers may be “lured in” by ads for low-cost products or subscription packages on the seller’s homepage, but not be able to find them when selecting purchases.

Examples of Dark Patterns in Online Commerce

Some of the dark patterns in ecommerce take advantage of the determinants of demand to heighten prospective customers’ desire for a good or service.  Others, unfortunately, are blatantly fraudulent.  While some are not illegal, most are unethical due to their attempt to mislead consumers.  

Misleading, but Legal

One common dark pattern that is potentially unethical, but certainly not illegal, is the use of countdown timers to make shoppers think that their deal or products in their digital shopping cart are going to expire soon.  As a result, the shopper may rush through the transaction before considering all the important details.  Later, they realize that they did not get the deal they thought would be beneficial.

A second legal dark pattern is the use of frequent pop-up ads to nag the shopper.  While most will attempt to close the ads and continue with their original purchase decision, some might be persuaded to accept the ads’ lure of add-ons or upgrades.  Those who accept the add-ons or upgrades are often given praise or flattery by the website or app, convincing them to click on such ads in the future.  This use of praise and flattery is considered acceptable for adults, but for youth may be seen as somewhat unethical (see the controversy over social media addiction for children and teens).

One dark pattern that straddles the divide between potentially unethical and potentially illegal is the seller intentionally making it difficult to cancel a subscription.  Often, online sellers make it extremely easy to sign up or upgrade, typically with just a few clicks of a mouse, but require a lengthy phone call - complete with frequent appeals to maintain service - to cancel.  Some customers give up during the cancellation process and decide to stick with their subscription, continuing the seller’s monthly revenue.  The situation can become illegal if the seller intentionally hides, or provides fraudulent, information about how to cancel a service.

Potentially Illegal

Dark patterns that lean toward potentially illegal involve what many would call “bait-and-switch” tactics.  Common ones involve free trials that require customers to put in their electronic payment information to access, but the seller never reminds the customer when the free trial is about to expire and payment begins.  If the customer misses the end of the trial and fails to cancel, he or she may be locked into a year-long subscription with hefty cancellation fees.  Another dark pattern in this vein is requiring customers to input lots of personal information to create user accounts after they made the purchase, which will usually subject them to lots of targeted ads for upgrades.  This personal information can also be sold to other firms, almost always without proper customer notification.

Blatantly illegal dark patterns involve outright lying to customers and/or omitting key information, making perceived deals literally “too good to be true”.

Economics of Dark Patterns

Dark patterns represent asymmetrical information, which can lead to market failure on the macro level by leading to economic inefficiency through adverse selection (consumer and producer mistakes).  If a large number of consumers are tricked into purchasing goods or services that are not actually desirable, the market becomes filled with substandard products.  Eventually, consumers reject most sellers in that market, leading to collapse.  This can cause macro-level harms due to the lack of necessary goods and services in this area, as well as increased unemployment.

Dark Patterns as Barriers to Entry

A dominant firm’s use of dark patterns to trick consumers may also be used to drive out honest competitors and create a monopoly.  Once this market dominance has been achieved, and customers have nowhere else to buy the products, the firm can end its use of dark patterns.  When threatened with the rise of new competitors, the monopoly again resorts to dark patterns to mislead customers into purchasing the monopoly’s goods and ignoring the offerings of competitors.

Regulatory Responses to Dark Patterns

Those dark patterns that lend more toward illegality, such as those seen as “bait-and-switch” tactics, have seen government attempts to regulate in recent decades.  Some examples are firm requirements on what information sellers must present to customers, especially regarding the parameters of “free trials,” annual auto-renewal of subscriptions, and how to cancel subscriptions.  In some jurisdictions, legislatures now require “same medium cancellations,” meaning the firm must allow the customer to cancel the service using the same medium that was used to purchase.  If you signed up for the subscription online, you must be able to cancel online.