Competition and Unconscionability

Ezra Friedman*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    1 Scopus citations

    Abstract

    This paper argues that the conventional legal doctrine that emphasizes lack of choice among suppliers or contracts as an element of unconscionability is misguided. I show that when a seller with significant market power offers only one contract, fear of alienating sophisticated customers can discourage the seller from exploiting the unsophisticated with an inefficient contract. In contrast, competitive sellers may lose money on sophisticated customers, and be willing to sacrifice them in order to exploit the unsophisticated. Likewise, offering a choice of contracts enables sellers to exploit the unsophisticated while offering an efficient contract to the sophisticated.

    Original languageEnglish (US)
    Article numberaht008
    Pages (from-to)443-494
    Number of pages52
    JournalAmerican Law and Economics Review
    Volume15
    Issue number2
    DOIs
    StatePublished - Dec 1 2013

    ASJC Scopus subject areas

    • Finance
    • Law

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