Consumer Contracts

This chapter presents an overview of the behavioral analysis of the law of consumer contracts. The chapter reviews various marketing techniques that build upon consumers’ bounded rationality, including the manner of presenting information, limited availability, low-ball and bait-and-switch techniques, and lenient return policies. It also analyzes several pricing techniques, such as price framing, multidimensional prices, deferred and contingent payments, and odd pricing. The chapter then turns to examining the content of consumer contracts, and highlights how pricing methods, non-salient clauses, and modifications might also exploit consumers’ limited rationality. In light of this overview, the chapter examines market-based (primarily competition and reputation) and legal solutions (primarily disclosure and mandatory regulations) to the challenges posed by consumer contracts.