(Mis)perceptions of Law in Consumer Markets

NYU Law and Economics Research Paper No. 16-11

Harvard Law School John M. Olin Center Discussion Paper No. 859

32 Pages Posted: 12 Mar 2016 Last revised: 10 Apr 2016

See all articles by Oren Bar-Gill

Oren Bar-Gill

Harvard Law School

Kevin E. Davis

New York University School of Law

Date Written: March 8, 2016

Abstract

There are good reasons to believe that consumers’ behavior is sometimes influenced by systematic misperceptions of legal norms that govern product quality. Consumers might misperceive specific rules, such as those found in food safety regulations, as well as more general standards, such as the unconscionability doctrine or limitations on waivers of default substantive or procedural rights. When demand is affected by systematic misperceptions of legal norms, lawmakers may be able to maximize welfare by deviating from the legal standard that would be optimal in the absence of misperception. We use a formal model to characterize these optimal deviations under different legal regimes (with different types and magnitudes of sanctions). In particular, should the legal standard be adjusted to correct or confirm the misperception? For instance, if consumers under-estimate the level of legal protection is it desirable to raise the legal standard to correct the misperception? Or should lawmakers lower the legal standard to confirm the misperception?

Keywords: Regulation, Consumer Protection, Misperceptions

JEL Classification: D11, D18, K13, K23, L15, L51

Suggested Citation

Bar-Gill, Oren and Davis, Kevin E., (Mis)perceptions of Law in Consumer Markets (March 8, 2016). Harvard Law School John M. Olin Center Discussion Paper No. 859. Available at SSRN: https://ssrn.com/abstract=2744758 or http://dx.doi.org/10.2139/ssrn.2744758

Oren Bar-Gill

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

Kevin E. Davis (Contact Author)

New York University School of Law ( email )

40 Washington Square South
Vanderbilt Hall, Room 335
New York, NY 10012-1099
United States
212-992-8843 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
226
Abstract Views
1,541
rank
137,375
PlumX Metrics