Chapter

Credit Cards

Bar-Gill Oren

in Seduction by Contract

Published in print August 2012 | ISBN: 9780199663361
Published online September 2012 | e-ISBN: 9780191751660 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199663361.003.0003
Credit Cards

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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

Chapter.  27891 words.  Illustrated.

Subjects: Company and Commercial Law

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