Digital Market Manipulation
University of Washington - School of Law; Stanford University - Law School
August 15, 2013
George Washington Law Review, Forthcoming
University of Washington School of Law Research Paper No. 2013-27
Jon Hanson and Douglas Kysar coined the term “market manipulation” in 1999 to describe how companies exploit the cognitive limitations of consumers. Everything costs $9.99 because consumers see the price as closer to $9 than $10. Although widely cited by academics, the concept of market manipulation has had only a modest impact on consumer protection law.
This Article demonstrates that the concept of market manipulation is descriptively and theoretically incomplete, and updates the framework for the realities of a marketplace that is mediated by technology. Today’s firms fastidiously study consumers and, increasingly, personalize every aspect of their experience. They can also reach consumers anytime and anywhere, rather than waiting for the consumer to approach the marketplace. These and related trends mean that firms can not only take advantage of a general understanding of cognitive limitations, but can uncover and even trigger consumer frailty at an individual level.
A new theory of digital market manipulation reveals the limits of consumer protection law and exposes concrete economic and privacy harms that regulators will be hard-pressed to ignore. This Article thus both meaningfully advances the behavioral law and economics literature and harnesses that literature to explore and address an impending sea change in the way firms use data to persuade.
Number of Pages in PDF File: 53
Keywords: marketing, consumer privacy, behavioral economics, Federal Trade Commission, vulnerability, big data, regulation, disclosure, First AmendmentAccepted Paper Series
Date posted: August 16, 2013 ; Last revised: April 29, 2014
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