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Protecting buyers from fine print

D'Agostino, Elena; Seidmann, Daniel J.

Authors

Elena D'Agostino



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.

Journal Article Type Article
Publication Date Oct 1, 2016
Journal European Economic Review
Print ISSN 0014-2921
Electronic ISSN 0014-2921
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 89
APA6 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
DOI https://doi.org/10.1016/j.euroecorev.2016.05.004
Keywords fine print; regulation
Publisher URL http://www.sciencedirect.com/science/article/pii/S0014292116300885
Copyright Statement Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by-nc-nd/4.0

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by-nc-nd/4.0





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