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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 http://ssrn.com/abstract=845108

[Stephen Safranek]

http://lawprofessors.typepad.com/contractsprof_blog/2005/11/one_sided_contr.html

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