The Situationist

Seduction by Contract

Posted by The Situationist Staff on October 20, 2012

Oren Bar-Gill recently posted his introductory chapter for his intriguing new book, “Seduction by Contract: Law, Economics and Psychology in Consumer Markets” on SSRN.   Here’s the abstract.

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:

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.

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3 Responses to “Seduction by Contract”

  1. […] Seduction by Contract: Crafting Contracts To Play on Biases – via thesituationist.wordpress.com – 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. […]

  2. […] (H/T the situationist) […]

  3. […] Seduction by Contract: Crafting Contracts To Play on Biases – via thesituationist.wordpress.com – 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. […]

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