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The contributors to the Consumer Law & Policy blog are lawyers and law professors who practice, teach, or write about consumer law and policy. The blog is hosted by Public Citizen Litigation Group, but the views expressed here are solely those of the individual contributors (and don't necessarily reflect the views of institutions with which they are affiliated). To view the blog's policies, please click here.

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Wednesday, February 08, 2012

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Mark Kvidera says Jon Blunk was one of his best workers. He said Blunk was always 30 minutes early, so when he didn't show up to work on Friday, Mark knew something was wrong.

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Do the benefits of competition extend to a world with imperfectly rational consumers? I argue that sellers, operating in a competitive market, will design their products, contracts and pricing schemes in response to consumer misconception, resulting in both efficiency losses and harm to consumers. Under certain conditions, competition provides incentives for sellers to educate consumers and reduce misconception, but these mistake-correction forces are limited.

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Do the benefits of competition extend to a world with imperfectly rational consumers? I argue that sellers, operating in a competitive market, will design their products, contracts and pricing schemes in response to consumer misconception, resulting in both efficiency losses and harm to consumers.

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