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Seduction by ContractLaw, Economics, and Psychology in Consumer Markets$
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Oren Bar-Gill

Print publication date: 2012

Print ISBN-13: 9780199663361

Published to Oxford Scholarship Online: September 2012

DOI: 10.1093/acprof:oso/9780199663361.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (www.oxfordscholarship.com). (c) Copyright Oxford University Press, 2019. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 23 September 2019

Credit Cards

Credit Cards

(p.51) 2 Credit Cards
Seduction by Contract

Bar-Gill Oren

Oxford University Press

This chapter focuses on the credit card contract. It identifies two features common to most credit card contracts — complexity and deferred costs. It presents a behavioural-economics theory of credit card contracts, and then argues that complexity and deferred costs represent a strategic response by sophisticated issuers to imperfectly rational cardholders. There is a behaviour market failure in the credit card industry that reduces efficiency and hurts cardholders. Regulatory intervention can help minimize the adverse effects of this market failure.

Keywords:   credit card contracts, consumer contracts, complexity, deferred costs, behavioural-economics theory, behaviour market failure, credit card industry, regulation

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