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http://ssrn.com/abstract=1015899
 
 

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Behavioral Law and Economics, Paternalism, and Consumer Contracts: An Empirical Perspective


Joshua D. Wright


Federal Trade Commission; George Mason University School of Law


NYU Journal of Law & Liberty, Vol. 2, No. 3, 2007
George Mason Law & Economics Research Paper No. 07-32

Abstract:     
Modern legal scholars frequently and increasingly base their analyses on the assumption, grounded largely in the extensive experimental literature, that individuals are subject to a number of systematic behavioral biases. Within the legal literature, behavioral economic analysis has been relied upon to generate a significant number of proposals for paternalistic regulation. These proposals are frequently accompanied by claims that neoclassical economics is insufficiently flexible to deal with these empirical observations, and that behavioral law and economics is as a superior guide for policy analysis. These claims must ultimately be resolved empirically and turn on whether incorporating insights from behavioral economics improves our ability to explain the law, understand the behavior of economic agents, or predict the consequences of legal change. This paper focuses on the shared interest of both neoclassical and behavioral economists in empiricism and explanatory power. It asks whether behavioral economic analysis of law has increased our knowledge in an area of "consumer contracts." Specifically, the paper surveys the available empirical evidence to assess claims from the behavioral law and economics literature involving exploitation of consumer biases with credit cards, standard form contracts, and shelf space contracts. I find that the empirical studies of firm and consumer behavior in these examples do not support the claims that behavioral law and economics generates greater predictive power than conventional price theory.

Number of Pages in PDF File: 43

Keywords: systematic behavioral biases, behavioral law and economics, paternalism, consumer contracts, behavioral economic analysis, consumer bias, conventional price theory

JEL Classification: D11, D12

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Date posted: September 21, 2007  

Suggested Citation

Wright, Joshua D., Behavioral Law and Economics, Paternalism, and Consumer Contracts: An Empirical Perspective. NYU Journal of Law & Liberty, Vol. 2, No. 3, 2007; George Mason Law & Economics Research Paper No. 07-32. Available at SSRN: http://ssrn.com/abstract=1015899

Contact Information

Joshua D. Wright (Contact Author)
Federal Trade Commission ( email )
601 New Jersey Ave., NW
Washington, DC 20580
United States
George Mason University School of Law ( email )
3301 Fairfax Drive
Arlington, VA 22201
United States
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