Taking Behavioralism Seriously: A Response to Market Manipulation

139 Pages Posted: 25 Apr 2001

See all articles by Jon D. Hanson

Jon D. Hanson

Harvard Law School

Douglas A. Kysar

Yale University - Law School


In two previous articles, we hypothesize that, because consumers are subject to predictable cognitive processes that depart from rational utility maximization, manufacturers have the opportunity and incentive to manipulate consumer perceptions of product risks. We suggest in those earlier articles that enterprise liability might offer the most efficient products liability regime in response to the problem of market manipulation. This work extends the analysis by focusing more particularly on the extent to which enterprise liability can combat manufacturer exploitation of consumer cognitive processes. It does so by responding to critiques recently offered by Professors Jeffrey Rachlinski and James Henderson in their article, "Product-Related Risk and Cognitive Biases: The Shortcomings of Enterprise Liability." Those authors argue that we overstate the extent of market manipulation and underestimate the ability of existing laws to identify and redress manipulative conduct. In addition, they argue that, even if enterprise liability does offer the best theoretical response to market manipulation, it offers little hope of practical results due to certain insurmountable difficulties in implementation. Finally, they contend that enterprise liability might actually backfire if adopted, ultimately exacerbating the problem of market manipulation by enabling product manufacturers who oversell safety through fear-based marketing appeals. We respond to each of these critiques and conclude that the case for enterprise liability remains remarkably strong.

Keywords: Torts, Products Liability, Behavioral Law and Economics

JEL Classification: K13

Suggested Citation

Hanson, Jon D. and Kysar, Douglas A., Taking Behavioralism Seriously: A Response to Market Manipulation. Available at SSRN: https://ssrn.com/abstract=265656 or http://dx.doi.org/10.2139/ssrn.265656

Jon D. Hanson

Harvard Law School ( email )

1563 Massachusetts
Griswold 403
Cambridge, MA 02138
United States
607-496-5207 (Phone)

HOME PAGE: http://www.law.harvard.edu/faculty/directory/facdir.php?id=25

Douglas A. Kysar (Contact Author)

Yale University - Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States

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