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Print Vol. 103, Issue 6


The End of Bargaining in the Digital Age

Saul Levmore & Frank Fagan

15 Sep 2018

Bargaining is a fundamental characteristic of many markets and legal disputes, but it can be a source of inefficiency. Buyers often waste resources by searching for information about past prices, where a seller already holds that information. A second—and novel—source of social loss is that some buyers will avoid otherwise beneficial bargains and sellers with negotiable prices because they recognize the seller’s advantage in any haggling match. They might also hide information that reveals their willingness to pay. This Article argues for mandated disclosure of past prices, and occasionally settlements, where these have been negotiable. The rule requires uniform or transparent pricing, where uniformity means that customers know that a price offered to them is the same as that offered to others, and transparency refers to the disclosure of past sale, or settlement, prices. The rule is applied to markets where consumers presently haggle with professional sellers, including the sale of medical services to hospital patients, law school merit scholarships offered to prospective students, and legal services sold to nonbusiness clients. We additionally explore its potential in employment relationships, where it might be deployed to reduce male-female pay disparities.

A requirement of uniform or transparent transactions can limit a seller’s ability to price discriminate. There are a few markets in which price discrimination is desirable; for example, in some cases that involve delivering important goods like life-saving medicines or clean water. We demonstrate how those markets can be preserved alongside a requirement of transparency. Drawing on a variety of examples, including familiar disclosure rules in contracts, as well as compulsory licensing in copyright, and the utmost good faith doctrine in insurance, we show that law is conceptually equipped to address the social loss generated by duplicative search and other inefficiencies, and we show that pricing disclosure rules can be easily implemented, especially as markets increasingly digitize.

To read more, click here: The End of Bargaining in the Digital Age.