Competition and Unconscionability

Ezra Friedman*

*Corresponding author for this work

Research output: Contribution to journalArticle

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

Fingerprint Dive into the research topics of 'Competition and Unconscionability'. Together they form a unique fingerprint.

  • Cite this