Does Anyone Read the Fine Print? Testing a Law and Economics Approach to Standard Form Contracts
New York University (NYU) - Department of Information, Operations, and Management Sciences
New York University School of Law
David R. Trossen
Knobbe Martens Olson & Bear LLP
October 6, 2009
CELS 2009 4th Annual Conference on Empirical Legal Studies Paper
NYU Law and Economics Research Paper No. 09-40
A cornerstone of the law and economics approach to standard form contracts is the 'informed minority' hypothesis: in competitive markets, a minority of term-conscious buyers is enough to discipline sellers from offering unfavorable boilerplate terms. The informed minority argument is widely invoked to limit intervention in consumer transactions, but there has been little empirical investigation of its validity. We track the Internet browsing behavior of 45,091 households with respect to 66 online software companies to study the extent to which potential buyers access the associated important standard form contract, the end user license agreement. We find that only one or two out of every thousand retail software shoppers chooses to access the license agreement, and those few that do spend too little time, on average, to have read more than a small portion of the license text. The results cast doubt on the relevance of the informed minority mechanism in a specific market where it has been invoked by both theorists and courts and, to the extent that comparison shopping online is relatively cheap and easy, suggest limits to the mechanism more generally.
Number of Pages in PDF File: 45working papers series
Date posted: August 4, 2009 ; Last revised: November 24, 2010
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