ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, November 21, 2005

One Sided Contracts

"One Sided Contracts in Competitive Consumer Markets"

Before you go out for your holiday shopping, you may want to read this paper. It is a theory about why stores print out pages of sheets along with your receipt whenever you buy things.

The authors state:

This discussion 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 nor-mative implications, and compare them to those of information-based explanations for one-sided terms.

Bebchuk, Lucian Arye and Posner, Richard A., "One-Sided Contracts in competitive Consumer Markets" (November 9, 2005). Harvard Law and Economics Discussion Paper No. 533

[Stephen Safranek]

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