About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

98 Nw. U. L. Rev. 1373 (2003-2004)
Seduction by Plastic

handle is hein.journals/illlr98 and id is 1383 raw text is: Copyright 2004 by Northwestern University, School of Law Printed in U.S.A. Northwestern University Law Review Vol. 98, No. 4 SEDUCTION BY PLASTIC Oren Bar-Gilr I. INTRODUCTION Consumer contracts are characterized by an asymmetry between the two parties: the seller of a good or the provider of a service on the one hand and the consumer on the other. One party is usually a highly sophisticated corporation, the other-an individual, prone to the behavioral flaws that make us human. Absent legal intervention, the sophisticated seller will of- ten exploit the consumer's behavioral biases. The contract itself, com- monly designed by the seller, will be shaped around consumers' systematic deviations from perfect rationality. Such biased contracting is not the con- sequence of imperfect competition. On the contrary, competitive forces compel sellers to take advantage of consumers' weaknesses. This broad theme is developed within a detailed case study of the credit card market and the credit card contract. Credit cards present a sig- nificant socio-economic phenomenon. In 2000, consumers used 1.44 bil- lion credit cards, i.e., almost fourteen cards per household, to purchase an estimated $1463 billion of goods and services. The average household completed $14,000 of credit card transactions, about 33% of the median household income.t Not only are credit cards important, they are also dan- gerous. Credit card debt, which amounted to $683 billion in 2000, is a no- The Society of Fellows, Harvard University, and John M. Olin Center for Law, Economics and Business, Harvard Law School (bargill@law.harvard.edu; http://www.fas.harvard.edu/-bargill). This Article greatly benefited from comments and suggestions by Yael Aridor Bar-Ilan, Jennifer Arlen, lan Ayres, Omri Ben-Shahar, Susan Block-Lieb, Gabriella Blum, Jonathan Bolton, Marcus Cole, Richard Craswell, Einer Elhauge, David Evans, Jesse Fried, Clayton Gillette, Ronald Gilson, Jeffery Gordon, Alon Harel, Samuel Issacharoff, Christine Jolls, Louis Kaplow, Aron Katz, Avery Katz, Russell Korobkin, Adriaan Lanni, Ronald Mann, Martha Minow, Edward Morrison, Gideon Parchomovski, Eric Posner, Alan Schwartz, Peter Siegelman, Jing Tsu, Elizabeth Warren, and seminar and conference par- ticipants at Berkeley, Chicago, Columbia, Fordham, Harvard, NYU, Penn, Stanford, Tel-Aviv, USC, Virginia, Yale, and the 2004 annual meeting of the American Law and Economics Association. I am especially grateful to Lucian A. Bebchuk for his invaluable advice and encouragement. For excellent research assistance, I thank Efrat Assaf, Winnie Fung, Benjamin Roin, Lee Schindler, and James Sulli- van. Finally, I thank the John M. Olin Center for Law, Economics, and Business at Harvard Law School and the William F. Milton Fund of Harvard University for generous financial support. I Bureau of the Census, STATISTICAL ABSTRACT OF THE UNITED STATES: 2002 § 25, tbls. 51, 652, 1165 (hereinafter STATISTICAL ABSTRACT). 1373

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most