Does Disclosure Matter?

43 Pages Posted: 24 Nov 2010

Date Written: November 23, 2010


Disclosure has long been the preferred regulatory approach to curtail one-sided standard form contract terms. Examples include the Truth in Lending Act, the new "ALI Principles of the Law of Software Contracts," and many other proposals which await Congressional approval. The appeal of disclosure is that it is relatively low cost, improves consumer decision-making and preserves consumer choice. For disclosure to be effective, however, it must increase readership and understanding of contracts to a meaningful rate, and, conditional on readership, contract content must be relevant to purchase decisions. This paper tests both these necessary conditions. We follow the clickstream of 47,399 households to 81 Internet software retailers to measure contract readership as a function of disclosure. We find that making contracts more prominently available does not increase readership in any significant way. In addition, the purchasing behavior of those few consumers who read contracts is unaffected by the one-sidedness of their terms. The results suggest that mandating disclosure online should not on its own be expected to have large effects on contract content.

Suggested Citation

Marotta-Wurgler, Florencia, Does Disclosure Matter? (November 23, 2010). NYU Law and Economics Research Paper No. 10-54, Available at SSRN: or

Florencia Marotta-Wurgler (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States


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