Abstract
With the rise of standard contracts, tensions persist between protecting consumers from unfair terms and preserving freedom of contract. A key concern is that consumers may waive legal rights, often unknowingly, particularly when dealing with trusted brands. To address this, we conducted a conjoint experiment with a representative US sample to evaluate how consumers value legal rights—such as warranties, liability, privacy, and conflict resolution—when they are fully aware, understand the terms, and must trade them off against product features like price and brand reputation. Our findings reveal that even when rights can be traded off against other features of the product, consumers value legal rights. Of the legal rights we tested, warranties and price were found to be the most decisive factors in their purchase decisions. Notably, we did not find evidence that brand reputation significantly alters the valuation of legal rights. These insights offer important empirical evidence to enrich the extensive policy debate.
1. Introduction
“Entire areas of law—contract default rules, sales law, privacy law, and copyright fair use (to name a few)—have been “deleted” by meticulously drafted documents that replace the pro-consumer provisions of these laws with pro-business arrangements.” (Ben-Shahar, 2013)
In 2015, Alex Hern decided to read all terms and conditions before accepting online services. After seven days and 146,000 words of legalese across 33 documents, he concluded that it is practically impossible to read every contract. Even if consumers wish to do so, their lack of negotiation power makes the effort largely pointless (Hern, 2015).
The problem aligns with the notion of asymmetric information. Many goods that consumers purchase are “experience goods,” whose quality can only be determined after use (Nelson, 1970, 1974). Similarly, contracts—rarely read or understood (Radin, 2013; Snyder & Mirabito, 2019)—can also be treated as experience goods, as the implications of their terms become clear only when a contingency arises.
This reality has sparked debate over the enforceability of standard contracts and the need for state intervention to protect consumers (Preston, 2015). According to classical economic theory, freedom of contract and competitive markets ensure efficient risk allocation (Posner, 1986). Even if most consumers neglect to read terms, an “informed minority” can discipline sellers for the collective benefit (Schwartz & Wilde, 1979). Additionally, markets may develop signals of quality and credibility, such as brand reputation (Spence, 1973). Brands, incentivized by reputational value, should theoretically avoid imposing and enforcing unfair terms (Bebchuk & Posner, 2006).
In practice, however, standard contracts are lengthy and complex, deterring rational consumers from reading them (Bakos et al., 2014). Given the low probability of contingencies and limited negotiation opportunities, it is often rational for consumers not to engage with fine print (Hillman, 2005; Hillman & Rachlinski, 2002). The practice of benefiting more sophisticated or assertive consumers by providing better terms or allowing for leniency in existing terms (Becher & Zarsky, 2019; Padi, 2022) may also render the “informed minority” as a less effective disciplinary mechanism. Consequently, sellers are incentivized to draft terms that disproportionately shift risks and costs to consumers (Bakos et al., 2014; Beales et al., 1981; Dickerson & Berman, 2014; Goldman, 1991; Karanicolas, 2021; Lagioia et al., 2022; Marotta-Wurgler & Chen, 2012; Salop, 1976).
Furthermore, the problem may be amplified in the case of branded products (Hillman, 2005; Hillman & Rachlinski, 2002). Consumers’ trust in reputable brands might discourage them from scrutinizing contracts, allowing businesses to include unfavorable terms with minimal resistance (e.g., Becher & Zarsky, 2007; Warkentine, 2007; Benoliel & Becher, 2019).
To assess the necessity and extent of consumer protection, it is essential to determine how much consumers value their legal rights. For legal terms to influence consumer choices, three conditions must hold: (1) awareness of rights, (2) comprehension of their implications, and (3) perceived value. While studies have examined consumer awareness (e.g., Marotta-Wurgler & Chen, 2012; Dickerson & Berman, 2014; Ben-Shahar & Schneider, 2014; Pavlović, 2016), readability (Arbel, 2024) and comprehension (Arbel & Toler, 2020; Schwarcz et al., 2025; Sovern et al., 2015; Strahilevitz & Kugler, 2016; Wulf & Seizov, 2023), with notable exceptions (Katz & Zamir, 2021, who examined the trade-off between liability and price) the valuation of legal rights has often been isolated from real-world trade-offs against price or product features (e.g., Acquisti et al., 2013; Hann et al., 2002; Rose, 2005; Snyder & Mirabito, 2019). This isolation risks overestimating their perceived importance.
Existing literature highlights that product features and contract terms often interact, making consumer choices inherently multidimensional (Olson & Jacob, 1972; Erevelles et al., 1999; Purohit & Srivastava, 2001). Yet little is known about the relative value consumers assign to their legal rights when forced to make trade-offs. Without empirical investigation into these interactions, policymakers risk overestimating or underestimating the legal protections needed for consumers.
Moreover, research on the interaction between brands and legal rights remains limited. Aside from a few studies on warranties and brands (Innis & Unnava, 1991; Lwin & Williams, 2006; Price & Dawar, 2002), the interaction between brand names and legal rights in contracts and their effect on product choice has been largely overlooked. Established brands serve as signals of quality, allowing businesses to charge premium prices. However, it remains unclear whether consumers are also more willing to waive legal protections when purchasing branded products. If consumers knowingly sacrifice rights for branded goods, one could argue for preserving freedom of contract. Conversely, if consumers neglect terms due to brand trust, intervention might be warranted (Hillman, 2005; Hillman & Rachlinski, 2002). Effective regulations, while at times essential, impose costs on businesses, consumers, and governments. Therefore, public policies must be evidence-based, reflecting the actual utility consumers gain from specific legal rights when making trade-offs (Acquisti et al., 2013).
This paper addresses a critical research gap by empirically investigating the extent to which consumers value legal rights when making trade-offs with other product features, as well as the role of brand names in these evaluations. To achieve this, we conducted two conjoint experiments using two distinct products—computers and laundry machines—to enhance the generalizability of the findings. Participants repeatedly chose between two products, with varying product features and contractual conditions. While there are many legal rights, for feasibility we have focused on the most discussed contractual rights in the literature - warranties, conflict resolution, liability, and privacy terms. By making both the features and legal rights salient in the experiment, we ensured participants were aware of them. Additionally, comprehension questions were included to confirm that participants understood the allocation of risks between sellers and consumers for each contractual condition. This design allows us to isolate and measure the value participants attach to abovementioned legal rights.
Our findings indicate that consumers generally value legal rights, even when required to trade them off against other product features and price, and regardless of the product type. Among the legal rights examined, warranties emerged as the most highly valued. This is consistent, for instance, with Marotta-Wurgler (2007, p. 711) who found in the context of software license agreements that warranties were the only term correlated with prices. At the same time, when all features and legal rights were considered collectively, we observed that—aside from warranties—some other product attributes and price played a larger role in consumer decision-making compared to legal rights. Notably, brand reputation did not significantly influence the valuation of legal rights, and no substantial individual differences were found regarding how participants valued these rights.
Our findings may justify different types of interventions, potentially contradicting ones. On the one hand, the fact that participants were willing to trade-off some of the rights, namely accepting less favorable terms in exchange for other features or price, strengthens the need to facilitate their decisions making as opposed to dictating specific terms. One solution could be to require the simplification and saliency of the presentation of the legal rights for each transaction. The market has been developing instruments, such as large language models (LLMs) to enhance consumers’ understanding of complicated and long contracts. Such models can be used to summarize and simplify the legal language of the contracts, making those contracts more accessible to consumers (Kolt, 2022; Arbel & Becher, 2023). Disclosure rules combined with similar market solutions can account for heterogeneity of preferences accross consumers and potentially enhance informed decision making.
On the other hand, the fact that even in the most “sterile” environment people cared about legal rights may suggest that at least some of those rights should be legally protected. While a less interventionist type of regulations such as disclosures would be desirable from the perspective of (classical) freedom of contract, it might not be sufficient. In the real-world, legal rights are often disclosed but are hidden in long and complicated standard contracts. Moreover, in some contexts mere simplification was found to be ineffective (Ben-Shahar & Chilton, 2016). This may be explained by the variety of cognitive biases to which consumers are subject (e.g., Bar-Gill, 2012; Korobkin, 2003), that might make them underestimate the importance of some rights. Finally, given the limited negotiation power of consumers, where contracts become de facto regulations by the firms (Kessler, 1943), such improvement of knowledge will not necessarily be followed by an enhancement of rights.
Therefore, while not resolving the extensive policy debate, our study provides important empirical evidence on consumers’ preferences to enrich this debate. Irrespective of ideological tendencies and preferences, public policies, especially such that affect large segments of the population, must be based on evidence.
The paper is structured as follows. First, we lay down the theoretical framework and discuss the relevant legal rules to inform our hypotheses to be tested. Next, we present our research design and discuss the different choices we have made. We then describe the results. Finally, in the discussion section we examine the policy implications of our results and discuss the limitations of the current study.
2. Theoretical Framework
2.1. The Legal Framework of Standard Contracts
Standard form contracts dominate consumer transactions, offering efficiency but raising persistent concerns about fairness and informed consent. Online transactions frequently layer multiple instruments, standard terms, separate privacy policies, community codes, and consent flows, which complicate transparency and exacerbate reading burdens (Hoffman, 2023; Samples et al., 2024). These contracts include pre-drafted terms covering legal rights such as warranties, dispute resolution, liability limitations, and data use (Korobkin, 2003, p. 1251; Marotta-Wurgler & Taylor, 2013). The terms typically regulate risk allocation, ranging from product defects to privacy, and are governed by different legal doctrines in the United States (US) and the European Union (EU). This section briefly discusses the key frameworks governing these contracts.
From a regulatory perspective, both the EU and the US provide consumers with certain substantive and procedural protections. However, the approaches differ substantially in structure, scope, and enforceability.
In the EU, the cornerstone of consumer contract protection is the Unfair Contract Terms Directive (93/13/EEC, hereafter UCTD). Contrary to being a mere extension of unconscionability doctrine, the UCTD establishes a more structured and substantive regime. The legislation is based on the rationale that consumers are in a weaker bargaining position vis-à-vis the seller, which offers the latter the opportunity to insert one-sided terms into the contract (Micklitz, 2010).
The UCTD’s Annex contains an indicative and non-exhaustive list of terms presumed to be unfair, categorized into three groups: (i) terms considered per se unfair (black list), (ii) terms presumed unfair unless proven otherwise (grey list), and (iii) terms evaluated under a general test of fairness (open category). Article 3 of the UCTD prohibits unfair terms that have not been individually negotiated and creates a significant imbalance in the parties’ rights and obligations, unless they pertain to the core subject matter of the contract and are expressed in plain, intelligible language (Article 4(2)). Article 5 also establishes a transparency requirement, mandating that all terms be drafted in a clear and comprehensible manner. This means that consumers will not be bound by contractual terms that are difficult to access, read, and understand for an average consumer (Loos & Luzak, 2016). Although national enforcement mechanisms vary, the Directive provides a high degree of substantive protection at the EU level (Loos & Luzak, 2016). Empirical work finds that many consumer contracts are in fact unreadable for lay readers, underscoring the Directive’s transparency rationale (Benoliel & Becher, 2019). Emerging computational work similarly maps systematic complexity in consumer contracts (Kolt, 2022) and explores whether ‘smart reader’ tools can shorten and simplify boilerplate while remaining accurate (Arbel & Becher, 2023).
In contrast, the US lacks a unified legislative framework comparable to the UCTD. Consumer protection arises through a combination of federal statutes (e.g., the Magnuson-Moss Warranty Act), state-specific unfair and deceptive acts and practices (UDAP) laws, and common law doctrines (for a detailed survey, see Zamir & Ayres, 2020, pp. 302-10). These rules operate in a piecemeal fashion, often resulting in uneven levels of consumer protection across jurisdictions (Nehf, 2020). The doctrine of unconscionability, codified in UCC §2-302, allows courts to invalidate terms that are both procedurally and substantively unfair. However, successful invocation of this doctrine requires a high threshold of proof and is rarely applied in routine consumer cases (Nehf, 2020). Furthermore, under UCC §1-304, there is an obligation to perform and enforce contracts in good faith. This obligation, however, is largely limited to post-contractual performance and rarely operates as a robust safeguard against boilerplate unfairness at formation. In electronic contracting specifically, click- and browse-wrap assent practices further complicate meaningful review (Hillman & Rachlinski, 2002).
Further protections are provided by UDAP statutes, such as California’s Consumer Legal Remedies Act (CLRA), which target deceptive contract terms and business practices. Federal law also limits certain warranty disclaimers under the Magnuson-Moss Act, particularly by prohibiting sellers from disclaiming implied warranties when offering written warranties (but not if they do not offer such warranties). Despite these tools, the prevailing model in the US remains ‘blanket assent’ (Llewellyn, 2016). Courts typically uphold boilerplate terms unless they are egregiously one-sided or hidden. This approach assumes that the market, or an informed minority of consumers, can discipline sellers. The “informed-minority” thesis is classically associated with Schwartz and Wilde (1979), and its empirical premise is contested by evidence that most consumers do not read boilerplate and face substantial disclosure frictions; readability is a central obstacle (Bakos et al., 2014; Samples et al., 2024). Where market discipline and reputation are invoked, contemporary work stresses both potential and limits in online environments (Becher, 2018). Of note, the assumption that an informed minority of consumers can effectively constrain one-sided boilerplates is increasingly challenged by behavioral and empirical evidence (Bakos et al., 2014). Consequently, one-sided boilerplates that have been drafted in the US could remain to be in use, although they would be unfair under the UCTD (Elshout et al., 2016).
A further complication arises when EU consumers are presented with US-style standard contracts, particularly by large multinational platforms (e.g., Google, Meta). While such terms may be unenforceable under EU law, their mere presentation can deter consumers from asserting rights, fostering a perceived imbalance in legal protection (Bradshaw et al., 2011; Furth-Matzkin, 2018). Even though such terms may ultimately be deemed non-binding under the UCTD, their presentation in standard contracts is still a ubiquitous practice (Loos & Luzak, 2016; Zamir & Ayres, 2020, pp. 325-30; Zamir & Katz, 2020). Accordingly, even with the substantive strength of the UCTD, its practical impact can be undermined by consumer misunderstanding or strategic contract design.
2.2. Standard Form Contracts and Consumers’ Legal Rights
2.2.1. The Problems of Standard Form Contracts
Consumers interacting with standard-form contracts encounter a range of legal rights that can be shaped by boilerplate, from product-specific protections like warranties and liability rules to procedural dimensions such as dispute-resolution venues and data-use commitments (Korobkin, 2003, p. 1251). In this study, we concentrate on four attributes: warranty length, liability allocation, dispute-resolution venue, and privacy/data use. These rights are widely observed in consumer boilerplates and amenable to identification within our conjoint framework, balancing legal salience with experimental tractability. This delineation is methodological rather than normative; while other provisions (e.g., unilateral modification, auto-renewal, hidden fees, limited remedies) are prevalent, they fall beyond the present design and are not the subject of inference here. Although privacy is doctrinally distinct, privacy and data-use promises are routinely bundled into consumer-facing contracting flows (e.g., clickwraps/checkout), which makes privacy a salient contractual attribute for choice in this setting (Becher & Benoliel, 2023; Samples et al., 2024). Therefore, when we refer to “legal rights” in relation to the current study, we are focusing on this limited number of rights, and not all existing rights.
This section outlines the main legal protections, clarifies the legal and empirical context in which they operate, and assesses whether consumers meaningfully value them when made salient and comprehensible. We structure the discussion around three conditions for contractual attributes to affect choice—awareness, comprehension, and perceived value—while recognizing that, even when awareness is ensured and comprehension verified, observed trade-offs may still reflect bounded rationality rather than misunderstanding (Bar-Gill, 2012; Becher, 2007; Korobkin, 2003). In particular, consumers may under-weight low-probability or deferred contingencies (e.g., dispute or product failure), struggle with incommensurable attributes, or privilege immediate, certain payoffs over future, uncertain protections (Zamir & Teichman, 2018, ch. 2; Kahneman, 2011, chs. 26, 29-30). In light of these cognitive tendencies, we interpret the estimated valuations as relative weights in multi-attribute decisions, rather than as evidence that disclosure alone will fully align consumer choices with expected legal risk.
Empirical studies demonstrate that consumers generally care about their legal rights. Snyder and Mirabito (2019) found that from a moral and legal perspective, consumers are primarily concerned with the substantive content of contractual terms rather than their mode of presentation. Similarly, Rose (2005) reports that consumers express strong concern for their legal rights. Nonetheless, only 47.5% of those surveyed were willing to pay for additional protection. It can, therefore, be argued that consumers are concerned about their legal rights, yet contextual factors might inhibit consistent action (Becher & Zarsky, 2019). In the realm of standard terms, this means that rational, cognitive, and social factors cause consumers to neglect the boilerplate (Hillman, 2005; Hillman & Rachlinski, 2002), even though they are concerned about their legal rights. This is confirmed by the fact that in practice most consumers do not read the terms of standard contracts (Marotta-Wurgler & Chen, 2012; Bakos et al., 2014; Ben-Shahar & Schneider, 2014). A ramification of this is that to the detriment of e-consumers, there is increasing use of onerous contractual terms and conditions, such as mandatory arbitration, forum selection and choice-of-law clauses, and liability disclaimers, that are buried in the fine print because sellers know that consumers will not read them (Dickerson & Berman, 2014; Pavlović, 2016).
Even if some consumers would want to read about their rights in the fine print, boilerplates are often complex, full of legalese, and written in a non-reader-friendly manner, thereby hampering comprehension of rights (Mann, 1994; Sovern et al., 2015). Mann (1994) indicates that in the context of consent forms, longer forms lead to less comprehension, participants sign forms without understanding the legal terms and their rights, and the very act of signing caused subjects to believe that they had lost their legal rights. Sovern et al. (2015) argue that the premise of consent is undermined if consumers do not understand the effect on their procedural rights of ticking a box or accepting a product.
Furthermore, there is also limited bargaining power on the side of the consumer. The take-it-or-leave-it nature of standard terms indicates that the seller has an inequitable degree of control over the bargaining process (Katz, 1997). This asymmetry led scholars like Kessler (1943) to characterize standard-form contracts as contracts of adhesion: non-negotiable and favoring the drafter. Besides, legal protections often relate to remote contingencies. Therefore, it might be even rational not to read these contracts (Hillman, 2005; Hillman & Rachlinski, 2002). A consumer may weigh the costs and benefits of reading and not reading and rationally find a net benefit in the latter. Consequently, consumers have limited knowledge of their rights (Elshout et al., 2016). To address these structural and cognitive constraints, we explicitly test valuation under conditions that assure awareness and comprehension, so that the estimates reflect perceived value rather than mere inattention.
Within this framework, we now turn to the specific contractual attributes examined in this study and discuss each type of clause separately in order to clarify its legal function and theoretical expectations regarding consumer valuation.
2.2.2. The Examined Legal Rights
2.2.2.1. Warranties and Warranty Disclaimers
The terms delineate the degree and type of warranty protection offered to buyers. Aspects that are relevant to consumers are the mentioning of express warranties, the limitation of the warranty period, and the presentation of the warranty (i.e., conspicuous, or not). In the economic literature, the role of warranties in consumer decision-making has been extensively discussed (e.g., Priest, 1981; Kelley, 1996). There is a consensus that warranties influence consumer decision-making, yet the degree to which it is a determinative factor is debatable. There is empirical evidence that confirms the signaling function of warranties in terms of quality and that they, therefore, function as risk mitigators (Boulding & Kirmani, 1993).
From a consumer perspective, it has been found that consumers prefer express warranties because they provide insurance against losses caused by product failure (Marotta-Wurgler & Chen, 2012). Consistent with this dual role, consumers often treat warranty length and scope as quasi-monetary payoffs, mapping longer coverage to lower expected out-of-pocket repair costs, which can increase the salience of warranties relative to more abstract legal terms (Bar-Gill, 2012). 1 However, consumers may also benefit from implied warranties (e.g., of merchantability or fitness for purpose), unless validly disclaimed (see, for example, in US law UCC § 2-316 or the Magnuson-Moss Warranty Act). These implied protections set a legal baseline that affects how consumers interpret express terms, even if they are not consciously aware of them. Because the baseline differs across legal regimes (e.g., stronger mandatory floors in EU consumer law), observed preferences over express warranty length should be read against these background rules.
Yet, in an online shopping setting, the risk-mitigating function of warranties is strongly attenuated by brand names (Lwin & Williams, 2006). Accordingly, it can be expected that the brand attribute will mitigate the effect that the warranties have on consumer decision-making.
2.2.2.2. Limitation of Liability
Terms that specify the extent of the seller’s liabilities for different types of loss arising out of the use of the product or service. It also covers remedies, if any, for such losses. 2 Relevant questions are: Who bears the risk of loss? Who bears the performance risk? Are consequential, incidental, special, or foreseeable damages disclaimed? Is there a limitation on the damages? Is there an indemnification clause?
Although these questions are highly important from a legal perspective, it has been found that for consumers the liability regime in the contract is not one of the most salient factors (Wickelgren, 2006). On the other hand, Katz and Zamir (2021) found that when asked directly participants do support imposing liability on sellers, even when it entails a certain price increase.
Salience may be further attenuated for well-known brands, which supply their own quality signals and thereby reduce the perceived incremental value of stronger seller-side responsibility (Price & Dawar, 2002; Purohit & Srivastava, 2001). This attenuation is consistent with a bounded-rationality account, optimism about rare disputes, small-risk misperception, and present bias, and with the difficulty of trading off incommensurable attributes when legal protections must be weighed against concrete product features (Bar-Gill, 2012; Korobkin, 2003).
However, consumers rarely distinguish between such legal nuances. Our experiment simplified these into directional allocations (e.g., seller vs. consumer). While this approach is legally reductive, it isolates the perceived value of each attribute for analytical purposes.
2.2.2.3. Conflict Resolution
Terms that restrict a buyer’s choices regarding his or her decision of where to sue the seller (forum-selection clauses), the applicable law, whether disputes must be resolved in court or through private arbitration (arbitration clauses), and how legal fees are to be allocated. 3 Such clauses can block consumers’ access to court (e.g., through mandatory arbitration) (Eisenberg et al., 2007), or effective redress if the forum is too remote from the consumer (Pavlović, 2016). In the context of arbitration agreements, consumers often lack a clear understanding of both their existence and their legal effect. As a result, some consumers may give up their procedural rights without fully appreciating the consequences, either because they do not realize they have entered into an arbitration agreement or because they do not understand its implications. Even when such clauses are noticed, cognitive limitations and the tendency to discount low-probability of future contingencies may lead consumers to under-weight their significance at the time of contracting (Zamir & Teichman, 2018, ch. 2), reinforcing the gap between expressed concern and actual behavior.
In general, consumers have a more favorable attitude toward litigation in front of a court instead of alternative dispute resolution (ADR) (Oseni et al., 2016), such as arbitration (Ghodoosi & Sharif, 2021), which in the United States often operates not only as a substitute for court adjudication but also as a mechanism to preclude class actions. Nonetheless, studies also show that consumers’ understanding of these rights is limited, and that perceived procedural fairness, rather than the substantive outcome of the dispute, drives preferences (Creutzfeldt, 2014). In addition, consumers’ preference for litigation in front of a court is shaped by their risk aversion. As the magnitude of the risk increases, consumers indicate a stronger preference for litigation over ADR mechanisms (Devasagayam & DeMars, 2004). Although ADR could be beneficial to consumers, they still regard courts to be fairer irrespective of the outcome (Ghodoosi & Sharif, 2021). This perception can be mediated, however, by familiarity with the procedure, perceived legitimacy, and clear information provision (Ghodoosi & Sharif, 2021; Oseni et al., 2016). Even when awareness is ensured and comprehension verified, consumers may still under-weight venue and process because they involve low-probability, deferred contingencies and invoke optimism and present-bias; small-risk misperception can further depress willingness to “pay” for favorable fora (Zamir & Teichman, 2018).
2.2.2.4. Privacy Rights
The focus of this right is not the protection against low-quality products, but the regulation of the use of consumers’ data. Nowadays data is a commodity that has market value. In 2017 it was referred to in the cover of The Economist as “[t]he world’s most valuable resource” (The Economist, 2017). The contract terms indicate to what extent the personal data of consumers are collected. This can be a moderate collection for, among others, marketing purposes or it can be a full license to collect, process, and store personal consumer data.
There is a vast literature on consumers’ valuation of privacy. In contemporary markets, consumers routinely confront disclosures about data collection, processing, and secondary use; evidence shows that willingness to allow data use rises when governance safeguards (consent, oversight, deletion, transparency) are present and when purposes are perceived as socially beneficial and falls for targeted marketing (Biasiotto et al., 2023; Christensen, 2021; Gupta et al., 2023; Pullman et al., 2012). Accordingly, treating privacy as a contractual attribute (even if doctrinally distinct) aligns with observed consumer trade-offs where privacy policies are bundled with standard terms.
Consumers often trade privacy for convenience, personalization, or price, giving rise to the so-called “privacy paradox” (Acquisti et al., 2013; Awad & Krishnan, 2006). Although consumers value their privacy, they often act in a manner that is opposed to it (Awad & Krishnan, 2006). This paradox reflects the tension between stated preferences and observed behavior, often shaped by contextual cues such as convenience, trust, or the salience of data use. Evidence from stated-preference and experimental studies shows heterogeneous but systematic trade-offs: willingness to permit data use tends to increase when purposes are perceived as beneficial or socially oriented, and to decrease for targeted marketing (Biasiotto et al., 2023; Christensen, 2021; Gupta et al., 2023; Pullman et al., 2012).
This gap between the desire for protection and the willingness to pay has also been captured by Hann et al. (2002) who demonstrated that consumers care about the protection of their privacy rights, yet they become more willing to give up some of their data for financial gains and convenience. Consistent with this, multi-attribute choice settings can sustain the “privacy paradox” without implying misunderstanding: competing attribute salience, framing, and optimism about low-probability harms help explain revealed trade-offs (Biasiotto et al., 2023; Christensen, 2021; Gupta et al., 2023; Pullman et al., 2012).
Importantly, the existence of systematic trade-offs does not imply that privacy protections lack value. Rather, it indicates that privacy is evaluated jointly with other product attributes and that its marginal contribution to choice depends on the decision environment. When protections are made explicit and comparable, such as in structured choice settings that clarify their scope and strength, it becomes possible to observe whether consumers attach independent value to stronger privacy safeguards.
Taken together, theoretical and empirical literature suggests that, when barriers to awareness and comprehension are removed, consumers may attach positive value to legal protections, including privacy safeguards. Therefore, we put forward the following hypothesis:
Consumers will prefer products accompanied by stronger legal protections (warranties, liability, conflict resolution venue, privacy).
2.3. Branding
Based on the signaling theory (Spence, 1973; Stiglitz, 1987), a brand name can serve as a signal for credible claims of quality. Higher quality allows sellers to charge higher prices and thus increases the seller’s profits. However, in order to create the positive reputation of a brand the seller must first invest and incur costs. Therefore, once a brand is established and enjoys a reputation of high quality, it is costly to make false claims of quality (Bebchuk & Posner, 2006; Klein & Leffler, 1981; Shapiro, 1983). Such a claim, if discovered, will lead to a loss of the reputation investment, or the “brand equity” (Erdem & Swait, 2001) as well as future profits. Therefore, a brand is a signal to consumers of a credible claim of the (unobservable) quality (Rao et al., 1999). The link between brand name and perceived quality has been established in many empirical studies (e.g., Rao & Monroe, 1989).
Many of the legal rights provided to consumers can also be seen to mitigate the problem of information asymmetry. Generally, they also serve as signals of unobservable quality. Given that consumers cannot verify the quality of many products, there are measures in place to protect them in case the product’s quality is low, or in cases of some damages. Those measures can also serve as signals of the credibility of quality claims. For example, to signal quality, a firm may provide warranties. A seller who knows the quality of a product is low will not offer a good warranty since the chances are high that they will need to fulfill the warranty more frequently (Grossman, 1981). With similar logic, by imposing fewer restrictions on their own liability or on conflict resolution possibilities, sellers may signal the credibility of their quality claims. If the product is of high quality, the risk of being sued is low.
The rights which protect consumers from defective products might be regarded as more valuable when the perceived risk of a product is high. It has been suggested that consumers’ expected utility depends on products’ attributes and consumers’ tastes (Lancaster, 1966). When attributes are uncertain, the perceived risk may reduce consumers’ expected utility. The “equity of the brand” reduces the perceived risk concerning the quality of the product as well as its information acquisition costs (Erdem et al., 2006; Erdem & Swait, 2001). In turn, it reduces the value of those legal rights (Innis & Unnava, 1991). It is conceivable that the power and attractiveness of brands may override consumers’ concerns about contractual protections. Therefore, we predict that:
Consumers will be more willing to waive rights for legal protection (warranties, liability, conflict resolution) when purchasing products of a well-known brand than of a less-known brand.
Privacy differs from the foregoing protections in that it does not primarily mitigate product risk but governs the collection and use of personal data. We therefore analyze it separately. In particular, the more data firms obtain about consumers, the more tailored they can make their products and marketing strategies. This in turn is expected to increase their sales and profits. Therefore, firms are willing to pay to obtain such data. However, the law increasingly protects individuals’ data and brings the power back to them to determine whether they are willing to give it away (e.g., the European GDPR, and locally in the US, the California Consumer Privacy Act – the CCPA). Since personal data may have exchange value for consumers, willingness to disclose can depend on what is offered in return, including brand attributes and the perceived purpose of data use (e.g., marketing versus public interest/sustainability). Evidence shows that such purpose cues systematically shift willingness to allow data use, aligning with our framing of privacy as analytically distinct from other legal rights (Biasiotto et al., 2023; Christensen, 2021; Gupta et al., 2023; Pullman et al., 2012).
Although personal data have economic value in digital markets, it is less clear whether consumers consciously treat data as a tradable asset that they seek to maximize. Empirical research shows that individuals often have limited understanding of how their data are collected, aggregated, and resold, and that privacy decisions are frequently shaped by contextual cues, heuristics, and present bias rather than deliberate valuation (Acquisti et al., 2015; Norberg et al., 2007). Moreover, a well-documented “privacy paradox” indicates that stated privacy concerns do not consistently translate into protective behavior. Nevertheless, to the extent that consumers associate well-known brands with higher quality or greater trustworthiness, they may be more willing to disclose personal data to such brands than to lesser-known firms. In that sense, data disclosure may function as an implicit rather than fully deliberative form of exchange. At the same time, reputation does not invariably discipline firm behavior; thus, positive brand signals need not translate into a greater appetite to waive formal protections (Arbel, 2019).
Nevertheless, brand name signals credibility and builds a general feeling of trust among consumers. This feeling may spill over to other aspects. In the context of privacy, consumers who have built trust in the brand may also be more trustful that these brands will not exploit their data. This can be derived from the “halo effect” (Beckwith & Lehmann, 1976; Holbrook, 1983; Wirtz & Bateson, 1995). The halo effect refers to a bias in which the overall impressions of specific traits of a subject under evaluation serve as a basis for evaluating other traits of said subject. More specifically, when a firm’s brand image is favorable, the firm activities are perceived more positively by consumers (Hsieh & Li, 2008). In the context of privacy, this could mean that a positive brand image positively influences the consumer’s attitude toward the privacy policy of the firm, but also the other corresponding attributes. We therefore treat privacy as a distinct outcome domain in which brand-generated trust may attenuate the perceived need for formal privacy protections.
Therefore, we predict that:
Consumers will be more willing to waive their privacy rights when purchasing products of a well-known brand than of a less-known brand.
2.4. Individual Characteristics, Brands and Legal Rights
Different individual characteristics might also affect how people perceive and value legal rights. First, although overall readership of standard-form contracts is extremely low, Bakos et al. (2014) find modest demographic differences, with older, higher-income, and more educated consumers being somewhat more likely to access contractual terms. However, even among these groups, actual reading time remains minimal. One explanation that was suggested for this observation was lower opportunity costs. Older people may have more time to read, and higher income and highly educated people might more easily understand the rights (Bakos et al., 2014). Because reading, comprehension, and valuation are conceptually distinct, we treat demographic patterns as theoretical priors rather than strong predictions in a multi-attribute setting.
Therefore, we expect that older participants and participants with higher education might be less willing to waive legal rights, due to a better understanding of the consequences. For income, we refrain from a strong directional prediction ex ante, given potentially offsetting mechanisms (greater familiarity with terms versus lower marginal utility of monetary savings). Overall, these individual-difference expectations are framed cautiously within the theoretical model and are secondary to the main mechanisms discussed above. We also recognize distributional concerns highlighted by structural contracting disparities (Padi, 2022).
Regarding gender, we do not have specific predictions. We will examine whether gender matters for the treatment of legal rights and other features as an explorative exercise. Any such exploration is ancillary to the core theoretical claims.
In addition, we examine the role of analytical thinking in making consumer choices with respect to legal rights. We follow the dual-process theories of cognition which discuss the two systems of processing information (Evans & Stanovich, 2013; Kahneman, 2011). System 1 of processing information is more automated and intuitive, where less effort is exerted, and the decision-maker is more subject to biases. System 2, on the other hand, is a more reflective and effortful way to process information and is better suited to avoid biases (Kahneman, 2011). This theory and the two modes of processing information were found to play a role in different contexts (e.g., Pennycook and Rand (2020) for fake news; Kantorowicz-Reznichenko et al. (2022) for conspiracy theories). Following this theory, it can be expected that more analytical participants (those using system 2) will reflect more on the consequences of waiving legal rights and will be less willing to do so. Empirically, we use the Cognitive Reflection Test (CRT) as a proxy for analytical style and, within this theoretical framework, anticipate at most modest differences once awareness and comprehension are ensured.
3. Research Design
The study was conducted in October 2023 on a quota representative sample of the American population (N = 2,238) using a survey firm MSI/Savanta that offers quota samples, which resemble the target populations in terms of age, gender, and education. The study was preregistered 4 and approved by the Erasmus School of Law Research Ethics Review Committee (approval number ETH2223-0309). Our sample size was derived based on cjpower (Freitag & Schuessler, 2020) 5 . We adhere to the following ex-ante input values for calculating the effective sample size: power = 0.8, alpha = 0.05, and detectable effect size = 0.05. We furthermore need to take into consideration that the most data-greedy is an interaction effect model between an attribute of four levels (privacy rights’ attribute) and the brands’ attributes, which is reduced to two levels (high/low familiarity with- and trust in-the brands). Of note is that respondents are choosing between two product profiles six times. Taking all of this into consideration, the effective sample size was calculated to be 24,959, indicating at least 2,080 respondents (assuming that they complete the conjoint tasks entirely). 6 To increase the quality of responses we have used an attention check question (see the question in the Supplemental Materials). Participants who failed the attention check were immediately excluded and did not take part in the main questions of interests. Therefore, they are also excluded from the analysis.
To test our main hypotheses, we used a paired-profile conjoint experiment. Conjoint designs have been used in prior research to investigate directly consumers’ preferences for contractual terms (e.g., for copyrights context see Kantorowicz et al., 2025). In order to increase the generalizability of our results we have chosen two different products, i.e., computers and laundry machines. Those products differ not only by their use, but also on many different dimensions (such as scope of use; possibility for updates; options of repair). The importance of not using only a single product is overcoming the concern that the results are product specific. Computers and laundry machines are inherently different. Therefore, we can examine whether valuation of legal rights is consistent across products or varies depending on the type of a product.
Attributes and Levels Displayed in the Laptop Computers Conjoint
Attributes and Levels Displayed in Laundry Machines Conjoint
As is typical in conjoint experiments, the effects of attributes on product choice are estimated using an OLS regression (linear probability model) with a binary outcome variable indicating the chosen (preferred) product and categorical nominal explanatory variables representing the attribute levels. To account for the lack of independence among observations contributed by the same respondents, standard errors are customarily clustered at the respondent level. The primary quantity of interest is the Average Marginal Component Effect (AMCE), which captures the change in the probability of choosing a given product when a particular attribute level is realized, relative to a specified reference level, and averaging over the joint distribution of the remaining attributes (Hainmueller et al., 2014). To estimate AMCE, we specifically used the cregg package for R (Leeper, 2020).
Conjoint experiments are suitable for capturing individual preferences in a multidimensional choice context. An important advantage of conjoint experiments, especially in the tabular form, is their ability to mitigate the ordering effects among attributes and reduce the social desirability bias. The latter is a common problem of regular surveys measuring stated preferences and intentions (Hainmueller et al., 2014, 2015; Horiuchi et al., 2022). For an in-depth discussion of the methodological merits of conjoint experiments, see Bansak et al. (2021) and Kantorowicz (2022).
We have started this paper by explaining that in order to be able to investigate whether consumers value their legal rights, we need to be able to disentangle the measurement of value from awareness and comprehension. The conjoint makes the level of legal protection salient to the participants when they make a choice between different products. Therefore, in our experimental design participants are clearly aware of the rights. This might contrast with real life situations where people do not read the terms and make their choice irrespective of them. Next, the pre-testing of comprehension, as well as a similar testing of comprehension during the main study (more on that below) assures that also the second condition is fulfilled – participants understand the legal rights before making their choice. Hence, when people make their choice of a product in our experiment, we know that the weight which is given to the legal rights reflects the value attached to it. If people value legal rights, those rights will play a role in their decision which product to buy. Furthermore, the conjoint design allows to investigate the relative weight which is given to legal rights as compared to the other product features (including brand) and price.
Participants were asked to make a choice between two options of a computer (laundry machine). This choice was made six times. Each time the features of the products/contracts randomly varied. For an example of the choice task see Figure 1. The order of the conjoints (computer versus laundry machine) also varied across participants to avoid order effects. Choice task example
To examine the channels discussed in the theoretical section (perceived reliability of the products and their potential spillovers to the decisions on the legal rights) we also measured the perceived reliability of the different brands. For this purpose, we used the measure from Chaudhuri and Holbrook (2001) which includes questions about the perceived safety, reliability, trust (in), and honesty of the brand. We used the same questions as in the pre-test, which can be viewed in the Supplemental Materials.
In addition, to examine whether participants indeed understand their legal rights we used the questions from the pre-test (see the questions in the Supplemental Materials), which were presented to the participants after they have completed the conjoints. The order of all the presented legal terms (warranties, conflict resolution, liability, privacy) and their content (e.g., for warranties the options were: no warranty, 3 months, 1 year, 10 years) was also randomized to avoid order effects. Finally, for our subgroup analyses, to investigate individual determinants of valuation of legal rights, we have collected demographic information on age, gender, level of education and income range.
To measure analytical thinking versus intuitive thinking we used performance on three questions of the Cognitive Reflection Test (CRT) (Frederick, 2005), which were presented to the participants in a randomized order to avoid order effects. We constructed an index of cognitive reflection by computing the proportion of correct answers (out of 3). For the specific questions, see the Supplemental Materials.
4. Results
In this section, we report the main results from the conjoint experiment. We first present the results for the comprehension check to set the scene. Next, we demonstrate how consumers value brands, prices, product attributes, and legal rights in their decision-making process. Second, we investigate the interaction between brands and legal rights. This is then extended to the interaction between prices and legal rights. Finally, we look into the role of individual characteristics. We report the average marginal component effects (AMCEs), which indicate the change in probability vis-à-vis a reference category. The results will be presented following the sequence of hypotheses put forward in the theoretical section.
4.1. Comprehension Checks
We performed comprehension checks to see if consumers understood the legal rights presented within the conjoint experiment. Consumers had to indicate the perceived benefits to consumers of a specific legal right. In principle, a legal right that provides more protection to consumers should be perceived as more beneficial to consumers.
For conflict resolution, consumers should perceive consumer choice as more beneficial than the seller having the choice. Regarding liability, when the burden entirely lies on the seller, consumers should perceive this as the most beneficial option. The opposite holds when the burden lies on the consumer, and a shared burden should occupy a midway position in terms of benefits. More extended warranties should be perceived as having the highest consumer benefits. Figure 2 demonstrates whether respondents understood what is more beneficial for them. It shows the density of how often each level of a Likert scale was chosen, where a higher score indicates that the feature is perceived as more beneficial to the consumer. Figure 2 illustrates that participants indeed understood the allocation of risk and which conditions benefit consumers. Concerning privacy, four options could be chosen, which in terms of benefits should be in the following ascending order: complete collection and processing (no privacy), marketing, sustainable development, and no collection (complete privacy). Although it is clear from Figure 2, that consumers understood that the no collection privacy option is the best, it is noteworthy that consumers perceived complete collection (no privacy) of data to be more beneficial than the collection of data for marketing purposes. This corresponds to the other results of the conjoint, in which the collection and processing of data for marketing purposes was consistently found to be the most disliked option. This, however, does not seem to be an indication of lack of comprehension, but simply a strong preference against usage of personal data for marketing purpose. Comprehension. Note: The scale is 1 = very unbeneficial for consumers; 7 = very beneficial for consumers
Respondents also indicated a clear preference for consumer choice over seller choice when deciding on the mode of conflict resolution. However, it should be noted that opposition to seller choice was less pronounced than support for consumer choice. This relatively more ambivalent response to seller-controlled conflict resolution does not pose a major concern, as respondents appear to recognize, at least in relative terms, that private choice is more beneficial to them. Given that seller choice is not strongly penalized by respondents, we anticipate, however, that the overall importance of this attribute in the decision-making process will be correspondingly less pronounced.
Overall, the comprehension checks indicate that consumers had a clear understanding of the legal rights when participating in the conjoint experiment. Combined with the saliency of these rights in the conjoint, we can safely conclude that the first two conditions for examining the valuation of rights, awareness and comprehension, are met.
4.2. Consumers’ Valuation of Legal Rights
Based on the theoretical and empirical literature on consumer preferences, we hypothesized that consumers prefer products that provide better legal protection (H1). As illustrated by Figure 3, we find evidence to generally support H1 in both product categories (the exact estimates along with their p-values are displayed in Table S1 and S2 in the Supplemental Materials). Irrespective of the other features, consumers generally prefer products that provide more robust legal protection. Overall, we observed similar trends in the results for laptops and laundry machines, which indicates that there are no substantial differences between the two product categories. Conjoint results
The effect is the most potent with respect to warranties. Consumers highly value extended warranty periods. Going from the no warranty category to the one-year warranty category increases the likelihood of choosing the product by approximately ten percentage points (0.1 AMCE). However, increasing the warranty from no warranty to 10 years nearly doubles it to 20 percentage points (0.2 AMCE). The effect of warranties has been found to become even more weighty in consumers’ decision-making process in the case of laundry machines. Furthermore, Figure 3 demonstrates that the weight participants attribute to warranties in their decision is almost equivalent to the weight they give to the price of the product. In fact, our results suggest that together with the price, warranties play the largest role in people’s choice between products.
Regarding liability, there is a clear consumer preference to shift the burden of loss to the seller, or at least share it, in comparison to the reference category in which the consumer fully bears the burden of a loss (estimated AMCE less than 0.1). However, the difference between the seller’s full liability and a shared liability burden is not significant for consumers.
The legal term with respect to conflict resolution seems to matter the least to consumers. When it comes to computers it does not matter for consumers whether the seller or they decide on jurisdiction where a lawsuit will be heard and whether it will be in front of a court or arbitral tribunal. When choosing which laundry machine to buy, participants slightly prefer products where they can make this decision. However, the estimated AMCE is less than 0.1, suggesting a smaller than ten percentage point increase in the probability of purchasing the product when the consumer-friendly conflict resolution mechanism is offered.
Finally, when it comes to consumers’ preferences with respect to privacy, there is preference for privacy-preserving options. This means that even when participants have a chance to trade-off their privacy against other features of the product, including price, this right matters for them. However, with respect to computers it seems that the least favorable option is when the declared purpose of collecting the data is for marketing. General collection and storing of data as well as collection of data to develop more sustainable products are treated equally in the choice between products. The option of no collection of data is the most preferred. The attitudes are slightly different when it comes to laundry machines. In that case generally collecting and storing data is treated the same as doing this for marketing purposes. On the other hand, products where data is not collected or collected for sustainability purposes are preferred.
Interestingly, for both products, participants prefer scenarios in which their data are collected for the development of more sustainable products rather than for marketing purposes. This pattern may reflect a benevolence-based preference: participants appear reluctant to be “exploited” for purely commercial objectives, while perceiving data use aimed at advancing sustainability as more legitimate or acceptable. This interpretation is consistent with prior evidence showing that consumers exhibit a preference for sustainable products, even when such products entail higher costs (e.g., Sammer & Wüstenhagen, 2006; Hardisty et al., 2010; Boyer et al., 2021). Future research should further examine the mechanisms underlying this preference.
Despite valuing legal rights, what we see in the results is that aside from warranties, other product features and price play a significant role when choosing a product. For example, with respect to computers, the RAM, storage capacity, price and brand all play a larger role in participants’ choice than legal rights such as liability, conflict resolution and privacy. With respect to laundry machines, only the level of noise receives lower or similar weight as the legal rights (again, putting aside warranties).
We can draw a parallel between our findings and the concept of salient versus non-salient prices (Bar-Gill, 2012). The imperfectly rational consumer is unable to calculate the full price when the choice is multidimensional and the contract is complex. And even if he/she can recall all price dimensions, he/she cannot calculate the impact of the different conditions on the total price. Therefore, the way such consumers deal with complexity is by focusing on salient prices and overlooking non-salient prices. In the context of this paper, product features are immediately relevant for the use of the product once purchased and are thus salient for the consumers. On the other hand, future contingencies relate to potential costs in the future and hence might be perceived less salient.
4.3. Brands and Legal Rights
The second prediction referred to the effect branding will have on consumers’ valuation of legal rights. In accordance with signaling theory, stronger brands (i.e., more familiar) were expected to signal higher quality and, therefore, lower perceived risk. Consequently, we hypothesized that consumers would be more willing to waive legal rights for brand products (H2).
Figure 3 above demonstrates that consumers in both product categories, laptops and laundry machines, strongly value brands and prefer more familiar brands. This reinforces signaling theory and the value of branding in the marketplace. However, we do not find support for the expected interaction between brands and legal rights. The willingness to waive legal rights does not differ significantly between more and less familiar brands (Figure 4). Although Figure 4 shows, consistent with the finding for the first hypothesis, that consumers prefer more robust legal protection, they are not willing to relinquish these rights to receive a product from a more well-known brand. The results hold for both the laptop and the laundry machine categories. This means we do not find support for the second hypothesis. Brands and legal rights
4.4. Brand and Privacy
The effect of branding was predicted to spill over to the privacy context. Consumers were expected to be positively influenced by the favorable image of the brand and become more willing to waive their privacy rights (H3).
From Figure 5, it can be seen that for laptops and laundry machines, there is no significant difference between more and less familiar brands. Even though participants preferred products which are offered with stronger privacy protection (no collection and storage of data), branding effect does not spill over to the privacy context. Hence, we find no support for the third hypothesis. This is confirmed also by the fact that we do not find evidence for the “halo effect”. As we have explained in the research design section, we measured to which extent participants trust in each brand. We then examined whether higher trust is followed by stronger willingness to give up legal rights in general, and privacy in particular. We found no evidence for this connection. As before, people value legal rights irrespective of how trustworthy they perceive the brand (see Figures S1 and S2 in the Supplemental Materials). Brands and privacy
4.5. Prices and Legal Rights
In addition to the interaction between brands and legal rights, we also analyzed the interaction between price and legal rights (Figure 6). If consumers value their legal rights, but are willing to trade them off with price, namely paying a lower price while accepting weaker legal protection, this might have implications for consumers’ policy. Price and legal rights
Preferences with respect to warranties seem to suggest that there is indeed correlation between the price consumers are willing to pay and the type of warranty as a legal protection they would like to receive. Namely, consumers are less willing to accept a shorter warranty for expensive products. The difference between high- and low-price products is small but statistically significant. This can be explained by consumers’ tendency to expect greater service and, therefore, longer warranty periods for more expensive products. Furthermore, consumers might be doing what is called “mental budgeting”. If warranties are perceived as indirect prices, namely a malfunction requires investing fixing costs, then a shorter warranty can be compensated by a lower price.
Nevertheless, the link between price and consumer-beneficial rights is much less pronounced with respect to the other rights. For instance, with respect to conflict resolution, the price of the product does not seem to play a role in the demand for the consumer to be the one deciding on the question of where and how to settle conflicts. In case of liability, consumers seem to in fact demand a larger shift of the risk of defect to the seller when the price of the product is higher. This effect is not present for the low-priced products. This can relate to consumers’ expectation to receive better legal protection against liability when purchasing a higher-priced product. Finally, with respect to privacy, even though for less costly products there is stronger preference for privacy-preserving options as compared to collection of data for the purpose of marketing, the difference with more expensive products is not statistically significant. Overall, the link between the price and legal rights does not seem to be very pronounced.
4.6. Individual Characteristics
Consumers’ valuation of legal rights might also be dependent on their individual characteristics. From the existing literature on the propensity to read contracts, we know that older, higher-income, and higher-educated people read more contractual terms. For age, education and income, we predicted that being older, and/or more educated will allow for a better understanding of terms, and having a higher income may often indicate more familiarity with contractual terms, resulting in a lower willingness to waive legal rights. For gender, no such predictions were made.
The results show that no statistically significant differences were found between higher and lower-educated/income respondents and their rights valuation for both product categories (Figures S5/S3 and S4/S6 respectively in the Supplemental Materials). The only exception is the preference of lower-income respondents for the seller to bear the burden of liability compared to higher-income respondents when buying a laundry machine. This outcome could be attributed to the fact that the financial effects of carrying the burden of liability for losses arising from the use of a laundry machine is expected to have a considerably larger impact on lower-income than higher-income respondents.
In terms of age (Figures S7 and S8 in the Supplemental Materials), it has been found that older respondents favor longer warranty periods for laptops and laundry machines more strongly than young respondents (less than 0.1 AMCE). Older respondents are also more price-sensitive than younger respondents (less than 0.2 AMCE). With respect to the other legal rights, no statistical differences were found. Gender (Figures S9 and S10 in the Supplemental Materials) did not play a role in valuing legal rights, except that women value extended warranty periods more than men with respect to laundry machines.
Furthermore, we hypothesized that analytical thinking might play a role and that more analytical participants will reflect more on the consequences of waiving legal rights and will be less willing to do so. The result demonstrates that there is no support for this conjecture (Figures S11 for computers and S12 for laundry machines in the Supplemental Materials). Of note is that for laptops, less-analytical respondents value extended warranty periods more strongly (0.2 AMCE) than more-analytical consumers (less than 0.2 AMCE). The general finding that there are no major differences between more analytical participants and less analytical participants might be significant. The literature suggests, including papers that are directly using CRTs, that more analytical people are less susceptible to cognitive biases than less analytical persons (e.g., Hoppe & Kusterer, 2011; Noori, 2016; Oechssler et al., 2009). If this is the case, then finding no major differences between these two groups in our experiment with respect to the valuation of legal rights might suggest that it reflects genuine valuation and is not simply the result of cognitive biases.
5. Discussion and Conclusions
In this study, we found that participants generally value their legal rights, albeit to varying degrees across different rights. The highest value is attached to warranties. In fact, we find that warranties and price are the two features which play the largest role in consumers’ choice of a product. The legal right which mattered the least for participants was conflict resolution, namely who chooses the jurisdiction where a case can be heard. At the same time, aside from warranties, some product features seem to matter more than the legal rights. We did not find major individual differences in how people value legal rights. This suggests that while people are willing to trade some legal rights for certain product features and price, these rights are nevertheless not insignificant in participants’ purchasing choices. Finally, against expectations, we did not find evidence that people are more willing to give up their legal rights when it concerns branded products.
Our findings contribute to the extensive discussion in the literature on the topic of standard contracts and consumers’ legal rights. Broadly speaking, evidence suggests that consumers either do not read the terms of the contract, or do not understand them. This problem is suggested to be exacerbated when it comes to popular brands due to the low bargaining power consumers have. Therefore, it has been suggested that regulatory or judicial intervention is warranted. This corresponds to the regulatory efforts that have been undertaken on a European level by virtue of the Unfair Contract Terms Directive (UCTD), which provides substantive protection to consumers against unfair terms (Loos & Luzak, 2016).
However, regulatory compliance costs might be high, and such interventions might limit the freedom of contracts. This train of thought can be seen in the absence of substantive regulation in the US. The freedom of contracts prevails, and the current approach is still based on blanket assent. Egregious unfair terms are tackled by virtue of classical contract law doctrines: unconscionability and good faith (Nehf, 2020).
Consequently, it is important to first properly understand to which extent people value their legal rights related to their consumer choices. Irrespective of the normative preferences or the general assumptions about the market and its relevant players, policy decisions need to be based on solid empirical evidence.
The ability to use observational data to investigate whether people value, and to what extent, legal rights might be limited. People might choose products which are accompanied by disadvantageous to them contractual conditions because they either did not read the contract terms, or did not understand them, or simply value other features of the product more than the legal rights. The valuation of the rights cannot then be disentangled from the other reasons. One way to examine valuation of rights is using experimental methods. And this has been done to some extent (Borges & Irlenbusch, 2007; Lim et al., 2018; Noam, 1981). However, often such studies do not account for the multidimensionality of consumers’ decisions. People might value rights in theory but still be willing to trade them off when facing an option of receiving better features or lower price. For this reason, a conjoint experiment may offer useful insights into the question what is the value people attach to legal rights when they need to make trade-offs between different features of the product and the rights.
From a policy perspective, our results indicate that different—and possibly competing—implications may be drawn. On the one hand, the finding that participants understand the legal rights and are still willing to trade off most of them for other features of the products may suggest that a policy emphasis should be on facilitating consumers’ informed decision making.
In order to achieve this, regulators could mandate a more simplified and salient disclosure of the legal rights. For instance, in the spirit of the suggestion by Bar-Gill (2012, p. 38), firms could be mandated to disclose real costs, or expected costs, by also taking into account the non-salient costs. Such an approach would respect the heterogeneity of preferences, which is curbed when one-fit all mandatory rules are imposed. Furthermore, it may provide space for the development of market solutions to the problems of readability and comprehension. For instance, with the rapidly developing technologies there is a growing possibility to enhance consumers’ autonomy using large language models. Such models may enable the task of reading and understanding standard contracts (Kolt, 2022; Arbel & Becher, 2023).
On the other hand, in light of the substantial body of research that shows many consumers are only boundedly rational and subject to cognitive biases (Korobkin, 2003; Bar-Gill, 2012, pp. 21-23), our findings might potentially underestimate the true value of legal rights. Such cognitive tendencies include myopia—excessive discounting of future costs (Zamir & Teichman, 2018, pp. 89-90); overoptimism regarding the likelihood of negative events (Becher, 2007; Korobkin, 2003); the availability heuristic (Tversky & Kahneman, 1973), which reduces perceived probabilities of events not readily recalled from memory; and confirmation bias – which can lead consumers to view contractual conditions more favorably once they have decided to purchase the good (Becher, 2007). Furthermore, even rational consumers might simply lack the expertise to appreciate the significance of various contractual rights. Therefore, although our study suggests that participants generally understand the allocation of risks under different legal rights, such cognitive biases may contribute to consumers underestimating the significance of these rights.
In addition, prior research suggests that when consumers perceive certain features as incomparable, trade-offs can generate stress. Korobkin (2003), for example, argues that weighing contractual conditions such as limitations on damages for personal injuries caused by defective products or restrictions on access to justice through mandatory arbitration clauses against price or other product features may evoke excessive stress. Privacy rights, which were included in this study, may also fall into this category of rights that Korobkin (2003) describes as “inalienable” by perception. To cope with the stress of such trade-offs, consumers may simply disregard these conditions and assign them less weight in their purchasing decisions.
Building on the framework of Bar-Gill (2012), in our context consumers may underestimate the risks of future contingencies, thus they may be more willing to forego their legal rights, even if a rational consumer would not. Therefore, their trade-off might not reflect the real value of the right they will be giving up. It is plausible that warranties—once a non-salient contractual feature—have become increasingly salient over time, thereby prompting sellers to compete on them. This shift provides another explanation why warranties played such an important role in participants’ product choices. In effect, warranties are perceived and evaluated much like prices. By contrast, other legal rights address contingencies that appear less likely to materialize and lie further in the future. As a result, these rights function as non-salient prices, which consumers typically fail to incorporate fully into their assessment of a product’s overall cost.
The outcome of these perceptions is that markets adapt to this behavior by lowering salient costs and raising non-salient costs (Bar-Gill, 2012, p. 19; Korobkin, 2003). In other words, sellers are incentivized to reduce product prices while embedding unfavorable contractual terms that shift additional risks and costs onto consumers to offset those price reductions. The result is a race-to-the-bottom with respect to contractual/legal terms (Becher, 2007).
Therefore, our findings indicating that individuals attach value to their legal rights to some degree—even under the particular conditions of explicit presentation of trade-offs and the presence of potential cognitive biases—may suggest that such rights warrant legal protection. In a context where the vast majority of standard-form contracts are lengthy and complex; where most consumers do not read them; and where consumers are already overloaded with the amount of information they have to consider, the likelihood that consumers would identify the specific contractual provisions pertaining to those rights is minimal. This conclusion is reinforced by research demonstrating that mere simplification of information is insufficient to improve decision-making (Ben-Shahar & Chilton, 2016).
Finally, also the significantly limited negotiation power of consumers, as well as findings demonstrating that more pro-seller terms are not reflected in lower prices (Marotta-Wurgler, 2007), may warrant stronger protection in the form of mandatory rules for those legal rights that play a substantial role in consumer decision-making. While often portrayed in a negative manner, recent studies have found that people in fact support mandatory rules related to consumers’ contractual legal rights (Zamir & Katz, 2020), even when it leads to a price increase (Katz & Zamir, 2021). This may indicate that contrary to the conventional assumptions, laypeople view mandatory rules as enhancing consumers’ freedom of contract in a more meaningful way, rather than restricting it (Zamir & Katz, 2020, p. 455).
Given the multiple directions in which our findings may be interpreted, the primary contribution of this study lies in enriching the policy debate (for a comprehensive review of the debate see, Zamir & Ayres, 2020). We provide empirical evidence that advances understanding of consumers’ preferences. Such evidence is essential for building the knowledge base needed to inform policymaking aimed at striking an appropriate balance between freedom of contract, market efficiency, and consumer rights.
While our results are informative, we should be cautious about their generalizability. As discussed in this paper, there is a difference between the legal frameworks governing standard contracts in the US as compared to the EU. This may suggest different consumer preferences in those systems. Therefore, further research needs to be conducted to investigate the right legal approach in other countries. Furthermore, while we used two different products to enhance generalizability, we did not cover other types of contracts (e.g., financial services, mortgages contracts, insurance products). Therefore, to be able to make a more general claim about the valuation of rights, preferences in the context of other products should be examined.
Supplemental Material
Supplemental Material - Consumers’ Rights in the Shadow of the Brand: A Conjoint Experiment on the Valuation and Trade-Offs of Contractual Rights
Supplemental Material for Consumers’ Rights in the Shadow of the Brand: A Conjoint Experiment on the Valuation and Trade-Offs of Contractual Rights by Elena Kantorowicz-Reznichenko, Adrianus van Heusden, Jaroslaw Kantorowicz in Journal of Law & Empirical Analysis
Footnotes
Author’s note
Adrianus van Heusden currently serves as the Digital Services Act (DSA) Officer for the Netherlands at DG CONNECT, European Commission. The information and views expressed in this article are those of the author alone and do not necessarily reflect the official opinion of the European Institutions. Any references to the work of the European Union are based solely on the author’s personal views and should not be interpreted as official statements or positions.
Acknowledgements
We would like to thank the discussant and participants of the 18th Annual Conference on Empirical Legal Studies (CELS), the participants of the first Conference of the European Society for Empirical Legal Studies (ESELS), and the participants of the Erasmus Center of Empirical Legal Studies (ECELS) Pre-analysis Seminars for helpful comments. We are also grateful to the three anonymous reviewers and the editor of this journal Eyal Zamir for extensive feedback which helped improving this paper. All remaining mistakes are, however, ours. Finally, we thank the Erasmus Trustfonds and the Dutch Sectorplan Social Sciences and Humanities for financial support of this project.
Funding
The authors disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: Erasmus Trustfonds and the Dutch Sectorplan Social Sciences and Humanities for financial support of this project.
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Supplemental Material
Supplemental material for this article is available online.
Notes
References
Supplementary Material
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