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112 Mich. L. Rev. 1417 (2013-2014)
Personalizing Default Rules and Disclosure with Big Data

handle is hein.journals/mlr112 and id is 1493 raw text is: PERSONALIZING DEFAULT RULES AND DISCLOSURE WITH BIG DATA Ariel Porat* Lior Jacob Strahilevitz** This Article provides the first comprehensive account of personalized default rules and personalized disclosure in the law. Under a personalized approach to default rules, individuals are assigned default terms in contracts or wills that are tailored to their own personalities, characteristics, and past behaviors. Similarly, disclosures by firms or the state can be tailored so that only infor- mation likely to be relevant to an individual is disclosed and information likely to be irrelevant to her is omitted. The Article explains how the rise of Big Data makes the effective personalization of default rules and disclosure far easier than it would have been during earlier eras. The Article then shows how personalization might improve existing approaches to the law of consumer contracts, medical malpractice, organ donation, inheritance, landlord-tenant relations, and labor law. The paper makes several contributions to the literature. First, it shows how data mining can be used to identify particular personality traits in individu- als, and these traits may in turn predict preferences for particular packages of legal rights. Second, it proposes a regime whereby a subset of the population (guinea pigs) is given a lot of information about various contractual terms and plenty of time to evaluate their desirability, with the choices of particular guinea pigs becoming the default choices for those members of the general public who have similar personalities, demographic characteristics, and pat- terns of observed behavior. Third, we assess a lengthy list of drawbacks to the personalization of default rules and disclosure, including cross subsidization, strategic behavior, uncertainty, stereotyping, privacy, and institutional-com- petence concerns. Finally, we explain that the most trenchant critiques of the disclosure strategy for addressing social ills are really criticisms of impersonal disclosure. Personalized disclosure not only offers the potential to cure the ills * Alain Poher Professor of Law, Tel Aviv University; Fischel-Neil Distinguished Visiting Professor of Law, University of Chicago Law School. ** Sidley Austin Professor of Law, University of Chicago Law School. The authors thank Michael Abramowicz, Omri Ben-Shahar, Yitzhak Benbaji, Eyal Benvenisti, Michael Birnhack, Tony Casey, Hanoch Dagan, Giuseppe Dari-Mattiacci, Lee Fennell, Talia Fisher, Olga Frishman, James Grimmelmann, Sharon Hannes, Todd Henderson, Aziz Huq, Ehud Kamar, Amir Khoury, Shay Lavie, Saul Levmore, Yoram Margalioth, Jonathan Masur, William McGevern, Gideon Parchomovsky, Eric Posner, Adam Samaha, Max Stearns, Cass Sunstein, and Lauren Willis, as well as workshop participants at the University of Chicago, the Interdisciplinary Center at Herzliya, Tel Aviv University, Northwestern's Kellogg School of Management, the University of Maryland, the Privacy Law Scholars Conference, and the annual meeting of the American Law and Economics Association for helpful conversations and comments. The authors would also like to thank Julian Dibbell, Jack Grein, and Omer Yehezkel for inspired research assistance, as well as the Russell J. Parsons Faculty Research Fund for generous research support. 1417

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