Document Type

Working Paper

Publication Date

11-11-2004

SSRN Discipline

Economics Research Network; Legal Scholarship Network; Law School Research Papers - Legal Studies; LSN Subject Matter eJournals; Law School Research Papers - Public Law & Legal Theory; Law School Research Papers - Law & Economics

Abstract

The rule of Hadley v Baxendale enjoys an important place in the economic analysis of contract law Over time Hadley has taken on great significance as an archetype for contract default rules that efficiently expose asymmetric information But a hotly contested debate questions whether economic theories of Hadley and economic approaches to contract law more generally have failed There are two concerns First it may be hard to empirically measure key variables in the economic models Second the models are complex making it difficult to sum the effects of multiple variables This Article takes up the challenge of empirically assessing the Hadley rule with a new approach that draws upon willingnesstopay studies in the field of marketing The first of its kind this work presents evidence that the Hadley rule is a preferable legal default in three simple markets subject to several important qualifications This study implies that markets with similar conditions might also benefit from a Hadley default rule More broadly it suggests that marketing research may be a rich source of data for testing economic theories of contract law

Download

Share

COinS