Seduction by Contract
Posted by The Situationist Staff on October 20, 2012
Consumers routinely enter into contracts with providers of goods and services. These contracts are designed by sophisticated sellers to exploit the psychological biases of consumers. They provide short-term benefits, while imposing long-term costs – because consumers are myopic and optimistic. They are excessively complex – because complexity allows sellers to hide the true cost of the product or service from the imperfectly rational consumer. Using both general theory and detailed case studies, this book explains the costs – to consumers and society at large – imposed by seductive contracts, and outlines a promising legal policy solution: Disclosure mandates. Simple, aggregate disclosures can help consumers make better choice. Comprehensive disclosures can facilitate the work of intermediaries, enabling them to better advise consumers. Effective disclosure would expose the seductive nature of consumer contracts and, as a result, reduce sellers’ incentives to write inefficient contracts.
Download the introduction for free here.
Related Situationist posts:
- Taking the Situation of Consumers Seriously
- The Situation of Creating a Consumer Financial Protection Bureau
- Hey Dove! Talk to YOUR parent!
- Tamara Piety on Market Manipulation
- Taking Behavioralism Seriously (Part I) – Abstract and Top Ten List
- Promoting Smoking through Situation
- The Big Game: What Corporations Are Learning About the Human Brain
- Warren on the Situation of Credit
- The Financial Squeeze: Bad Choices or Bad Situations?
- No Contract for Old Men
- The Situation of Subprime Mortgage Contracts - Abstract
- The Situation of Our Food – Part II
- The Situation of Our Food – Part III
- The Changing Face of Marketing?
One of the very first legal-academic articles (part of a trilogy) devoted to the way sellers manipulate consumers is Taking Behavioralism Seriously: The Problem of Market Manipulation (74 N.Y.U.L. Rev. 363 (1999)) available for free download on SSRN.