Ryan Calo, Digital Market Manipulation, 82 Geo. Wash. L. Rev. 995 (2014), https://digitalcommons.law.uw.edu/faculty-articles/25
George Washington Law Review
In 1999, Jon Hanson and Douglas Kysar coined the term “market manipulation” to describe how companies exploit the cognitive limitations of consumers. For example, everything costs $9.99 because consumers see the price as closer to $9 than $10. Although widely cited by academics, the concept of market manipulation has had only a modest impact on consumer protection law.
This Article demonstrates that the concept of market manipulation is descriptively and theoretically incomplete, and updates the framework of the theory to account for the realities of a marketplace that is mediated by technology. Today’s companies fastidiously study consumers and, increasingly, personalize every aspect of the consumer experience. Furthermore, rather than waiting for the consumer to approach the marketplace, companies can reach consumers anytime and anywhere. The result of these and related trends is that firms can not only take advantage of a general understanding of cognitive limitations, but can uncover, and even trigger, consumer frailty at an individual level.
A new theory of digital market manipulation reveals the limits of consumer protection law and exposes concrete economic and privacy harms that regulators will be hard-pressed to ignore. This Article thus both meaningfully advances the behavioral law and economics literature and harnesses that literature to explore and address an impending sea change in the way firms use data to persuade.