Law Commons^™

Justifying Bad Deals, Tess Wilkinson-Ryan

All Faculty Scholarship

In the past decade, psychological and behavioral studies have found that individual commitment to contracts persists beyond personal relationships and traditional promises. Even take-it-or-leave it consumer contracts get substantial deference from consumers — even when the terms are unenforceable, even when the assent is procedurally compromised, and even when the drafter is an impersonal commercial actor. Indeed, there is mounting evidence that people import the morality of promise into situations that might otherwise be described as predatory, exploitative, or coercive. The purpose of this Article is to propose a framework for understanding what seems to be widespread acceptance of regulation …

Why Do Retail Investors Make Costly Mistakes? An Experiment On Mutual Fund Choice, Jill E. Fisch, Tess Wilkinson-Ryan

All Faculty Scholarship

There is mounting evidence that retail investors make predictable, costly investment mistakes, including underinvestment, naïve diversification, and payment of excessive fund fees. Over the past thirty-five years, however, participant-directed 401(k) plans have largely replaced professionally managed pension plans, requiring unsophisticated retail investors to navigate the financial markets themselves. Policy-makers have struggled with regulatory interventions designed to improve the quality of investment decisions without a clear understanding of the reasons for investor mistakes. Absent such an understanding, it is difficult to design effective regulatory responses.

This article offers a first step in understanding the investor decision-making process. We use an internet-based …