Coase-Sandor Working Paper Series in Law and Economics
Publication Date
2006
Publication Title
Law & Economics Working Papers
Abstract
This paper shows that "one-sided" terms in standard contracts, which deny consumers a contractual benefit that seems efficient on average, may arise in competitive markets without informational problems (other than those of courts). A one-sided term might be an efficient response to situations in which courts cannot perfectly observe all the contingencies needed for an accurate implementation of a "balanced" contractual term when firms are more concerned about their reputation, and thus less inclined to behave opportunistically, than consumers are. We develop this explanation, discuss its positive and normative implications, and compare them to those of information-based explanations for one-sided terms. Key words: contracts, standard form contracts, contracts of adhesion, reputation, opportunism, observability. JLE classification: D8, K12.
Number
270
Recommended Citation
Richard A. Posner & Lucian Arye Bebchuk, "One-Sided Contracts in Competitive Consumer Markets" (John M. Olin Program in Law and Economics Working Paper No. 270, 2006).
Additional Information
Chicago Unbound includes both works in progress and final versions of articles. Please be aware that a more recent version of this article may be available on Chicago Unbound, SSRN or elsewhere.