Digital Market Manipulation

57 Pages Posted: 16 Aug 2013 Last revised: 5 Oct 2014

Ryan Calo

University of Washington - School of Law; Stanford University - Law School; Yale Law School

Date Written: August 15, 2013

Abstract

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.

Keywords: marketing, consumer privacy, behavioral economics, Federal Trade Commission, vulnerability, big data, regulation, disclosure, First Amendment

Suggested Citation

Calo, Ryan, Digital Market Manipulation (August 15, 2013). 82 George Washington Law Review 995 (2014); University of Washington School of Law Research Paper No. 2013-27. Available at SSRN: https://ssrn.com/abstract=2309703 or http://dx.doi.org/10.2139/ssrn.2309703

Ryan Calo (Contact Author)

University of Washington - School of Law ( email )

William H. Gates Hall
Box 353020
Seattle, WA 98105-3020
United States

Stanford University - Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States

Yale Law School ( email )

127 Wall Street
New Haven, CT 06511
United States

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