The literature on price discrimination typically focuses on immutable features, such as higher interest rates offered to black borrowers or higher prices offered to women at car dealerships. This paper studies behavior-based pricing (BBP), which is a practice of setting prices according to consumers' past behavior, such as prior purchases. This is becoming the predominant form of price discrimination with the rise of artificial intelligence. Unlike race-based and sex-based discrimination, with BBP consumers can strategically adjust their behavior to impact the prices they will be offered in the future, and sellers can adjust prices to increase the informational value gleaned from consumers' behavior. This paper further identifies two key legal insights: Mandating BBP disclosure may reduce overall welfare despite decreasing informational asymmetry; and data protection laws, such as the right to erase data and the right to opt out of data collection, could increase welfare despite increasing informational asymmetry.
Consent forms, often hailed as a means of protecting vulnerable individuals, are ubiquitous. We argue that consent forms are likely to activate people's "contract schemas"-mental scripts implicitly called upon whenever people encounter documents that resemble contracts. Across three experiments, we identify the psychological baggage that accompanies contracts and elucidate how these problematic associations bedevil consent forms, which serve a distinct purpose. In Study 1, laboratory participants were asked to consent to an unrestricted search of their smartphones; those whose consent was sought in writing reported feeling more pressured to consent than participants approached verbally. In Study 2, participants regarded written consent as more binding than oral consent across a variety of domains. In Study 3, the introduction of written consent led people to downgrade the importance of verbal consent. In light of these findings, we call for greater judicial sensitivity to how ordinary people understand consent formalities. "The signature is the moral person himself, or at least the legal person." (Jack Goody [1986, p. 73], quoted in Jacob 2007, p. 249)
This article examines the moderating effect of statutory interpretative methods on sympathy bias in legal decision-making. Previous research has shown that sympathy toward litigants can lead to biased decisions, particularly in cases of legal ambiguity. Two preregistered studies of 300 laypersons and 339 legal practitioners experimentally tested the effect of various interpretative methods on sympathy bias. The results reaffirm the existence of sympathy bias and demonstrate that participants are less swayed by sympathy when instructed to interpret the law by focusing on its plain meaning rather than the legislature's intention or policy considerations. These findings suggest that a focus on the text of a legal rule can serve as a debiasing technique against sympathy bias. Interestingly, this moderating effect was not mediated by the effect of the interpretative method on the rule's clarity or the decision's predictability. The findings contribute to ongoing debates about judicial bias and statutory interpretation. To seek justice is to seek something free of bias. -Aristotle
In this article I first describe the basic principles that parents employ in disciplining their children. The description is based on a survey of parents, the major results of which are that parental sanctions are premised on wrongdoing—not on the mere causation of harm; that parental sanctions tend to be greater when wrongdoing results in harm than when it does not; that parental sanctions for intentionally harmful conduct exceed those for negligence; and that parental sanctions are not raised when the probability that wrongdoing would be discovered is low. I then develop a theory to explain the principles of discipline as functional for parents. The kernel of the theory is that the rules of discipline maximize the expected utility of parents—assuming that the utility of parents is reduced by the occurrence of harm and also reflects the well–being of their children. After elaborating the theory, I comment on several related issues, including the possible influence of childhood experience on our preferences as adults over legal rules; and I remark on the similarity between the principles of criminal law and those applied by parents in disciplining their children.
We conducted an experiment to study the effects of live broadcasting in the courtroom. Collaborating with a court in China, we randomly assigned trials to be broadcast live on the Internet during a 4-week period. We found that live broadcasting significantly affects the behavior of the parties to the trials. Their average speaking speed was slower during a live broadcast and did not return to normal after the first several minutes, implying that they were cautious or nervous. Meanwhile, the parties' statements became less informative. In contrast, the repeat players, that is, judges and lawyers, became more stable and less emotional during a live stream. Judges also used more legalese to behave more formally in court. Contrary to prevalent theories, we did not find that live streaming diverted judges' attention, limited their questioning, or affected court decisions. Nor did we find that lawyers played to the cameras or became more voluble.
This study examines the standardization of venture capital (VC) contracts since the release of the National Venture Capital Association (NVCA) model charter in 2003. Using nearly 5,000 charters issued in connection with a startup’s Series A financing, the paper finds a significant increase in the model’s adoption from less than 3% of charters in 2004 to nearly 85% by 2022. Adoption of the Delaware-oriented charter has also been accompanied by the growing dominance of Delaware incorporation, with Delaware charters growing from 54% of sample charters in 2004 to 100% in 2022. High adoption rates among the six most active law firms servicing U.S. startups largely explain the success of the standardization project.While cosine similarity analysis reveals charters are overall more similar in 2022 than in 2004, the capital structures of Series A startups have also become substantially more complex. Series A charters authorizing only a single class of common stock and a single series of “Series A” preferred stock constituted 86% of charters in 2004 but constituted just 5% of 2022 charters, while 30% of 2022 charters had either 2 classes of common stock or 3 or more series of preferred stock. The additional complexity arises almost entirely from multiple securities reflecting prior seed stage financing. In contrast, efforts to add founder-friendly capital securities—such as dual class common stock and founder preferred stock—have made only modest inroads. Overall, the story of VC contracting over the past two decades is largely one of standardization, albeit with growing complexity around startup capital structures due to the increasing importance of seed stage capital and changing expectations regarding what constitutes a “Series A” startup.
Optimal law enforcement and regulation models generally assume a single punishment scheme. However, when there is unobservable heterogeneity in violation propensities, welfare can be improved by offering punishment menus to potential offenders ex ante. When this is done, individuals with low violation propensities will choose low audit probabilities and high penalties, while individuals with high violation propensities will choose high audit probabilities and low penalties. We present a formal model showing that allowing individuals to choose from a punishment menu improves social welfare relative to a single punishment scheme by simultaneously reducing auditing costs and enhancing deterrence. This model provides a rationale for some recently proposed citizen trust policies in which people can enter their identities in a public registry and be subject to less-demanding inspections.
