Essay: Cheating pays

Emily Kadens*

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

Common private-ordering theories predict that merchants have an incentive to act honestly because if they do not, they will get a bad reputation and their future businesses will suffer. In these theories, cheating is cheating whether the cheat is big or small. But while reputation-based private ordering may constrain the big cheat, it does not necessarily constrain the small cheat because of the difficulty in discovering certain types of low-level cheating and the consequent failure of the disciplining power of reputation. Yet the small cheat presents a significant challenge to modern contracting, both between businesses and in the contracts of adhesion imposed on consumers. To encourage private law scholars to address the unique governance challenges posed by low-level cheating, this Essay describes the conditions under which low-level cheating can flourish and become widespread. It demonstrates this so- called “Cheating Pays” scenario using a historical case study in which a seventeenth-century London grocer, trading under precisely those conditions that private-ordering theories predict will incentivize honesty, not only cheated extensively but also successfully remained in business after having been caught and publicly punished. Identifying the scenarios in which cheating pays has implications for how firms use contracts and how consumers might use the courts to try to reduce opportunistic behavior.

Original languageEnglish (US)
Pages (from-to)527-590
Number of pages64
JournalColumbia Law Review
Volume119
Issue number2
StatePublished - Jan 1 2019

Fingerprint

reputation
scenario
private law
seventeenth century
incentive
governance
firm

ASJC Scopus subject areas

  • Law

Cite this

Kadens, Emily. / Essay : Cheating pays. In: Columbia Law Review. 2019 ; Vol. 119, No. 2. pp. 527-590.
@article{7270b0af02c5416999e1845dacdfce45,
title = "Essay: Cheating pays",
abstract = "Common private-ordering theories predict that merchants have an incentive to act honestly because if they do not, they will get a bad reputation and their future businesses will suffer. In these theories, cheating is cheating whether the cheat is big or small. But while reputation-based private ordering may constrain the big cheat, it does not necessarily constrain the small cheat because of the difficulty in discovering certain types of low-level cheating and the consequent failure of the disciplining power of reputation. Yet the small cheat presents a significant challenge to modern contracting, both between businesses and in the contracts of adhesion imposed on consumers. To encourage private law scholars to address the unique governance challenges posed by low-level cheating, this Essay describes the conditions under which low-level cheating can flourish and become widespread. It demonstrates this so- called “Cheating Pays” scenario using a historical case study in which a seventeenth-century London grocer, trading under precisely those conditions that private-ordering theories predict will incentivize honesty, not only cheated extensively but also successfully remained in business after having been caught and publicly punished. Identifying the scenarios in which cheating pays has implications for how firms use contracts and how consumers might use the courts to try to reduce opportunistic behavior.",
author = "Emily Kadens",
year = "2019",
month = "1",
day = "1",
language = "English (US)",
volume = "119",
pages = "527--590",
journal = "Columbia Law Review",
issn = "0010-1958",
publisher = "Columbia Law Review Association",
number = "2",

}

Kadens, E 2019, 'Essay: Cheating pays', Columbia Law Review, vol. 119, no. 2, pp. 527-590.

Essay : Cheating pays. / Kadens, Emily.

In: Columbia Law Review, Vol. 119, No. 2, 01.01.2019, p. 527-590.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Essay

T2 - Cheating pays

AU - Kadens, Emily

PY - 2019/1/1

Y1 - 2019/1/1

N2 - Common private-ordering theories predict that merchants have an incentive to act honestly because if they do not, they will get a bad reputation and their future businesses will suffer. In these theories, cheating is cheating whether the cheat is big or small. But while reputation-based private ordering may constrain the big cheat, it does not necessarily constrain the small cheat because of the difficulty in discovering certain types of low-level cheating and the consequent failure of the disciplining power of reputation. Yet the small cheat presents a significant challenge to modern contracting, both between businesses and in the contracts of adhesion imposed on consumers. To encourage private law scholars to address the unique governance challenges posed by low-level cheating, this Essay describes the conditions under which low-level cheating can flourish and become widespread. It demonstrates this so- called “Cheating Pays” scenario using a historical case study in which a seventeenth-century London grocer, trading under precisely those conditions that private-ordering theories predict will incentivize honesty, not only cheated extensively but also successfully remained in business after having been caught and publicly punished. Identifying the scenarios in which cheating pays has implications for how firms use contracts and how consumers might use the courts to try to reduce opportunistic behavior.

AB - Common private-ordering theories predict that merchants have an incentive to act honestly because if they do not, they will get a bad reputation and their future businesses will suffer. In these theories, cheating is cheating whether the cheat is big or small. But while reputation-based private ordering may constrain the big cheat, it does not necessarily constrain the small cheat because of the difficulty in discovering certain types of low-level cheating and the consequent failure of the disciplining power of reputation. Yet the small cheat presents a significant challenge to modern contracting, both between businesses and in the contracts of adhesion imposed on consumers. To encourage private law scholars to address the unique governance challenges posed by low-level cheating, this Essay describes the conditions under which low-level cheating can flourish and become widespread. It demonstrates this so- called “Cheating Pays” scenario using a historical case study in which a seventeenth-century London grocer, trading under precisely those conditions that private-ordering theories predict will incentivize honesty, not only cheated extensively but also successfully remained in business after having been caught and publicly punished. Identifying the scenarios in which cheating pays has implications for how firms use contracts and how consumers might use the courts to try to reduce opportunistic behavior.

UR - http://www.scopus.com/inward/record.url?scp=85067021607&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85067021607&partnerID=8YFLogxK

M3 - Article

AN - SCOPUS:85067021607

VL - 119

SP - 527

EP - 590

JO - Columbia Law Review

JF - Columbia Law Review

SN - 0010-1958

IS - 2

ER -

Kadens E. Essay: Cheating pays. Columbia Law Review. 2019 Jan 1;119(2):527-590.