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Does Contract Disclosure Matter?

Author

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  • Florencia Marotta-Wurgler

Abstract

Disclosure has long been the preferred regulatory approach to prevent one-sided standard-form contract terms, but its efficacy is unclear. For disclosure to be effective, it must increase readership of contracts and, conditional on reading, affect decisions. I use clickstream data on software shoppers to test these two conditions in the online context. I find that the prominence of disclosure of a software license agreement has little effect on readership. Moreover, those who read the license are equally likely to purchase the product regardless of its one-sidedness. Mandatory online disclosure regimes thus seem unlikely to impose competitive pressure on sellers.

Suggested Citation

  • Florencia Marotta-Wurgler, 2012. "Does Contract Disclosure Matter?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(1), pages 94-119, March.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201203)168:1_94:dcdm_2.0.tx_2-5
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    References listed on IDEAS

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    1. Stefano DellaVigna & Ulrike Malmendier, 2004. "Contract Design and Self-Control: Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 353-402.
    2. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian, 2011. "How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices?," NBER Chapters,in: Explorations in the Economics of Aging, pages 75-96 National Bureau of Economic Research, Inc.
    3. Laibson, David I. & Agarwal, Sumit & Driscoll, John C. & Gabaix, Xavier, 2009. "The Age of Reason: Financial Decisions over the Life-Cycle with Implications for Regulation," Scholarly Articles 4554335, Harvard University Department of Economics.
    4. Sumit Agarwal & John C. Driscoll & Xavier Gabaix & David Laibson, 2009. "The Age of Reason: Financial Decisions over the Life Cycle and Implications for Regulation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(2 (Fall)), pages 51-117.
    5. James J. Choi & David Laibson & Brigitte C. Madrian, 2010. "Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds," Review of Financial Studies, Society for Financial Studies, vol. 23(4), pages 1405-1432, April.
    6. Bryan Bollinger & Phillip Leslie & Alan Sorensen, 2011. "Calorie Posting in Chain Restaurants," American Economic Journal: Economic Policy, American Economic Association, vol. 3(1), pages 91-128, February.
    7. Beales, Howard & Craswell, Richard & Salop, Steven, 1981. "Information Remedies for Consumer Protection," American Economic Review, American Economic Association, vol. 71(2), pages 410-413, May.
    8. Yannis Bakos & Florencia Marotta-Wurgler & David R. Trossen, 2009. "Does Anyone Read the Fine Print? Testing a Law and Economics Approach to Standard Form Contracts," Working Papers 09-04, NET Institute, revised Aug 2009.
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    Citations

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    Cited by:

    1. Daniel L. Chen, 2012. "Does Disclosure Matter?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(1), pages 120-123, March.
    2. Ko Haksoo, 2012. "Law and Technology of Data Privacy: A Case for International Harmonization," Asian Journal of Law and Economics, De Gruyter, vol. 3(1), pages 1-33, December.
    3. Giesela Rühl, 2015. "Alternative and Online Dispute Resolution for Cross-Border Consumer Contracts: a Critical Evaluation of the European Legislature’s Recent Efforts to Boost Competitiveness and Growth in the Internal Ma," Journal of Consumer Policy, Springer, vol. 38(4), pages 431-456, December.

    More about this item

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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