Protecting buyers from fine print

D'Agostino, Elena; Seidmann, Daniel J.

Abstract

Buyers typically do not read the …ne print in contracts, providing an incentive for a monopolist to draft terms which are unfavorable to buyers. We model this problem, proving that trade must then be inefficient. We show that regulation which mandates efficient terms raises welfare. More interestingly, regulations which prohibit the least efficient terms may reduce welfare by inducing the monopolist not to other favorable terms. We extend these results to markets in which some buyers are naive, showing that prohibiting the least efficient terms may also harm the naive buyers.

Citation

D'Agostino, E., & Seidmann, D. J. (2016). Protecting buyers from fine print. European Economic Review, 89, https://doi.org/10.1016/j.euroecorev.2016.05.004

• Journal Article Type: Article
• Acceptance Date: May 9, 2016
• Online Publication Date: May 13, 2016
• Publication Date: Oct 1, 2016
• Deposit Date: May 17, 2016
• Publicly Available Date: May 17, 2016
• Journal: European Economic Review
• Print ISSN: 0014-2921
• Electronic ISSN: 0014-2921
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 89
• DOI: https://doi.org/10.1016/j.euroecorev.2016.05.004
• Keywords: fine print; regulation
• Public URL: https://nottingham-repository.worktribe.com/output/974620
• Publisher URL: http://www.sciencedirect.com/science/article/pii/S0014292116300885