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Duty to Read vs Duty to Disclose Fine Print. Does the Market Structure Matter?

Author

Listed:
  • D’Agostino Elena

    (Department of Economics, University of Messina, Messina, Italy)

  • De Benedetto Marco Alberto

    (Department of Economics, Statistics and Finance, University of Calabria, Arcavacata di Rende (CS), Italy)

  • Sobbrio Giuseppe

    (Department of Economics, University of Messina, Messina, Italy)

Abstract

Firms use standard contracts and possibly include unfavorable fine print which consumers may read at some positive cost. We propose a comparison between a monopoly and a perfect competition market under (1) an unregulated legal regime (duty to read) and (2) a regulation that mandates clause disclosure (duty to disclose). If consumers bear the duty to read contract terms, regardless of market structure, sellers disclose in equilibrium only if it is cheaper than reading for consumers. Conversely, if sellers bear the duty to disclose contract terms, then such regulation is never welfare improving in either market; it may turn out to be consumer protective only if there are several sellers, whereas it is uneffective on this regard in a monopoly.

Suggested Citation

  • D’Agostino Elena & De Benedetto Marco Alberto & Sobbrio Giuseppe, 2023. "Duty to Read vs Duty to Disclose Fine Print. Does the Market Structure Matter?," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 23(1), pages 1-47, January.
    • Handle: RePEc:bpj:bejtec:v:23:y:2023:i:1:p:1-47:n:10
    DOI: 10.1515/bejte-2020-0157
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    More about this item

    Keywords

    fine print; market structure; disclosure; reading cost; regulation;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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