Economic analysis of standard form contracts: The monopoly case

Research output: Contribution to journalArticlepeer-review


The terms of standard form contracts are rarely known to consumers. Still, it is often argued that few consumers who read and understand the contract can assure that it does not include sub-optimal terms. According to this argument, if the proportion of informed consumers is sufficiently high, they can secure an optimal set of contract terms to the benefit of all other consumers. This paper shows that when suppliers can adjust the content of the form contract, the few reading consumers cannot correct the market failure. In fact, unless all consumers read and understand the form contract, a monopoly is always encouraged to offer sub-optimal terms, i.e., terms that benefit her but at a higher cost to the consumers.

Original languageEnglish
Pages (from-to)119-136
Number of pages18
JournalEuropean Journal of Law and Economics
Issue number2
StatePublished - Oct 2007


  • Standard form contracts

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Law


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