Behavioural Economics in Unfair Contract Terms Cautions and Considerations

Journal of Consumer Policy, pp. 337-358, 2011

23 Pages Posted: 23 Oct 2012

See all articles by Michael G. Faure

Michael G. Faure

University of Maastricht - Faculty of Law, Metro; Erasmus University Rotterdam (EUR) - Erasmus School of Law

Hanneke A. Luth

Policy Research Corporation; Erasmus University Rotterdam (EUR) - Rotterdam Institute of Law and Economics

Date Written: October 23, 2012

Abstract

This paper provides an overview of the economic approach to unfair contract terms whereby various economic approaches are distinguished. Addition is paid to the neo classic perspective on unfair contract terms as well as to the approach followed by information economics. Then evidence is presented based on behavioral law and economics showing that to a large degree traditional remedies advanced in information economics (like mandatory information disclosure) may not be able to effectively debiase consumer perceptions. Empirical evidence seems to indicate that, although the results are very context specific, consumers suffer from 'signing without reading' as a result of which many unfair contract terms can survive in the market. Hence, some suggestions are formulated based on 'regulatory paternalism' to nudge consumers towards more efficient decisions inter alia via collective agreements on unfair contract terms from which well-informed consumers could opt outs.

Keywords: behavioral economics, behavioral law and economics, standard contract terms, unfair contract terms, mandatory disclosure, information economics

JEL Classification: K12, K32

Suggested Citation

Faure, Michael G. and Luth, Hanneke A., Behavioural Economics in Unfair Contract Terms Cautions and Considerations (October 23, 2012). Journal of Consumer Policy, pp. 337-358, 2011. Available at SSRN: https://ssrn.com/abstract=2165695

Michael G. Faure (Contact Author)

University of Maastricht - Faculty of Law, Metro ( email )

PO Box 616
Maastricht, 6200 MD
Netherlands
+31 - 43 - 388 30 60 (Phone)
+31 - 43 - 325 90 91 (Fax)

HOME PAGE: http://www.michaelfaure.be

Erasmus University Rotterdam (EUR) - Erasmus School of Law ( email )

3000 DR Rotterdam
Netherlands

Hanneke A. Luth

Policy Research Corporation ( email )

Parklaan 40
Rotterdam, 3016 BC
Netherlands

HOME PAGE: http://www.policyresearch.nl

Erasmus University Rotterdam (EUR) - Rotterdam Institute of Law and Economics ( email )

Burgemeester Oudlaan 50
PO Box 1738
Rotterdam, 3000 DR
Netherlands

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