Exit From Contract

Journal of Legal Analysis, Vol. 6, p. 151 (2014)

33 Pages Posted: 18 Feb 2013 Last revised: 23 Feb 2018

See all articles by Oren Bar-Gill

Oren Bar-Gill

Harvard Law School

Omri Ben-Shahar

University of Chicago Law School

Date Written: July 11, 2014

Abstract

Exit from contract is one of the most powerful consumer protection devices, freeing consumers from bad deals and keeping businesses honest. Yet consumers often choose transactions with lock-in provisions, trading off exit rights for other perks. This article examines the costs and benefits of free exit, as compared to the lock-in alternative. It argues that present regulation of exit penalties is poorly tailored to address concerns about lock-in, particularly in light of increasingly ubiquitous market-based solutions. The article also calls (regulatory) attention to loyalty rewards, which are shown to be as powerful as exit penalties, and equally detrimental.

JEL Classification: K12, L14

Suggested Citation

Bar-Gill, Oren and Ben-Shahar, Omri, Exit From Contract (July 11, 2014). Journal of Legal Analysis, Vol. 6, p. 151 (2014). Available at SSRN: https://ssrn.com/abstract=2220271 or http://dx.doi.org/10.2139/ssrn.2220271

Oren Bar-Gill

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

Omri Ben-Shahar (Contact Author)

University of Chicago Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

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