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Seduction by Contract - Law, Economics, and Psychology in Consumer Markets (Hardcover)
Loot Price: R2,462
Discovery Miles 24 620
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Seduction by Contract - Law, Economics, and Psychology in Consumer Markets (Hardcover)
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Total price: R2,482
Discovery Miles: 24 820
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Consumers routinely enter into long-term contracts with providers
of goods and services - from credit cards, mortgages, cell phones,
insurance, TV, and internet services to household appliances,
theatre and sports events, health clubs, magazine subscriptions,
transportation, and more. Across these consumer markets certain
design features of contracts are recurrent, and puzzling. Why do
sellers design contracts to provide short-term benefits and impose
long-term costs? Why are low introductory prices so common? Why are
the contracts themselves so complex, with numerous fees and
interest rates, tariffs and penalties?
Seduction by Contract explains how consumer contracts emerge from
the interaction between market forces and consumer psychology.
Consumers are short-sighted and optimistic, so sellers compete to
offer short-term benefits, while imposing long-term costs.
Consumers are imperfectly rational, so sellers hide the true costs
of products and services in complex contracts. Consumers are
seduced by contracts that increase perceived benefits, without
actually providing more benefits, and decrease perceived costs,
without actually reducing the costs that consumers ultimately bear.
Competition does not help this behavioural market failure. It may
even exacerbate it. Sellers, operating in a competitive market,
have no choice but to align contract design with the psychology of
consumers. A high-road seller who offers what she knows to be the
best contract will lose business to the low-road seller who offers
what the consumer mistakenly believes to be the best contract. Put
bluntly, competition forces sellers to exploit the biases and
misperceptions of their customers.
Seduction by Contract argues that better legal policy can help
consumers and enhance market efficiency. Disclosure mandates
provide a promising avenue for regulatory intervention. Simple,
aggregate disclosures can help consumers make better choices.
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.
Developing its explanation through a general framework and detailed
case studies of three major consumer markets (credit cards,
mortgages, and cell phones), Seduction by Contract is an accessible
introduction to the law and economics of consumer contracts, and a
powerful critique of current regulatory policy.
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