Joel Stonedale

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Behavioral economists have offered plentiful evidence that consumers sometimes deviate from rational economic decision-making in predictable ways due to cognitive biases. The effect of the biases, however, varies greatly across markets. Scholars have identified several markets as particularly exploitative, including the markets for subprime mortgages, credit cards, cell phone services, video rentals, and retail rebates What separates these markets from the markets for thousands of other complex products, such as computers and cars, in which consumers appear able to understand their preferences and the product well enough to drive the market toward efficiency? This Article addresses the problem with consumer exploitation and describes some of the market characteristics that facilitate consumer exploitation. Specifically, Part III describes the following characteristics that facilitate consumer exploitation: multiple transactions within one contract, multidimensional pricing, individualized products, infrequency of purchase, large market.

Understanding the market characteristics that lead to exploitation may be useful in estimating the scope of consumer exploitation. Exploitative markets should be distinguished from markets generally. One could conclude from the growing list of competitive markets where exploitation appears common that exploitation is either a normal characteristic of consumer markets or that it is more common than it actually is. This Article intends to shed light on the scope of the problem by demonstrating that these markets share a few characteristics, explaining how those characteristics facilitate exploitation, and showing how these characteristics are limited to particular types of markets. This does not mean that these characteristics are necessary to the existence of exploitative markets or that all markets with these characteristics will be exploitative. Rather, it appears that these characteristics play a large part in facilitating exploitation. If a market has some of these characteristics, there is a greater chance that it will be exploitative.