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Commercial Law | Law | Law and Economics


Consumers are a lot like fish, out there waiting to be hooked. Like most images, this one is a caricature of reality. The choice and search effort of consumers is suppressed in order to explore the implications of selling activity by manufacturers and retailers. In particular, the fishing analogy suggests that there is a tendency toward excessive selling activity if sellers do not take into account the effects of their activity on the costs of their rivals. However, sellers, like fishermen, have an incentive to arrange their affairs to mitigate the dissipation of rents. This argument is developed in Section I. The conclusion that sellers might overspend on selling activity appears inconsistent with the observation that increased advertising frequently results in lower consumer prices; however, it is not. The apparent paradox is resolved in Section II. In Section III, some speculations on the relationship between marketing and the destruction of social capital are put forth.



© 1986 The University of Chicago. Originally published in the Journal of Legal Studies, Vol. 15, p. 173, 1986.