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

D’Agostino Elena (), Alberto De Benedetto Marco () and Sobbrio Giuseppe ()
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D’Agostino Elena: Department of Economics, University of Messina, Messina, Italy
Alberto De Benedetto Marco: Department of Economics, Statistics and Finance, University of Calabria, Arcavacata di Rende (CS), Italy
Sobbrio Giuseppe: Department of Economics, University of Messina, Messina, Italy

The B.E. Journal of Theoretical Economics, 2023, vol. 23, issue 1, 1-47

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.

Keywords: fine print; market structure; disclosure; reading cost; regulation (search for similar items in EconPapers)
JEL-codes: D40 K12 K20 L11 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1515/bejte-2020-0157

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