Manipulation by Mislaid Priorities

Harvard Law School John M. Olin Center Discussion Paper No. 1063

51 Pages Posted: 1 Jun 2021

See all articles by Oren Bar-Gill

Oren Bar-Gill

Harvard Law School

Omri Ben-Shahar

University of Chicago Law School

Date Written: May 29, 2021

Abstract

This paper lays a foundation for a new theory of manipulation, based on the misprioritization of (truthful) information. Since consumers review only a subset of all available information, firms can harm consumers by prioritizing information that maximizes firms’ profits but has a smaller impact on the utility that consumers stand to gain from the purchase. Moreover, the distortions due to misprioritized information can arise not only from firms’ boastful disclosures, but also from the warnings and disclosures mandated by lawmakers. The paper identifies the product and market characteristics that determine the optimal prioritization of information and, correspondingly, the incidence of harm when the wrong information is prioritized for disclosure—either voluntarily by sellers or by legal mandate. It provides a framework for optimal legal intervention.

Keywords: Manipualtion, Asymmetric information, Consumer markets, Disclosure

JEL Classification: D11, D18, D82, D83, D91, K20, L15

Suggested Citation

Bar-Gill, Oren and Ben-Shahar, Omri, Manipulation by Mislaid Priorities (May 29, 2021). Harvard Law School John M. Olin Center Discussion Paper No. 1063, Available at SSRN: https://ssrn.com/abstract=3855013

Oren Bar-Gill (Contact Author)

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

Omri Ben-Shahar

University of Chicago Law School ( email )

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

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