The freedom to contract and the free-rider problem

Research output: Contribution to journalArticlepeer-review

Abstract

We present an economic argument for restraining certain voluntary agreements. We identify a class of situations where single individuals or parties may use the freedom to contract to subtly manipulate large groups of individuals by offering them contracts that promote free-riding behavior. We provide three examples where placing restrictions on the freedom to contract may prove beneficial. The first example provides a rationale for the prohibition of exclusionary contracts. We point to the role most favored nation clauses may play in facilitating such inefficient exclusionary practices. The second example provides justification for prohibiting employers from proposing to compensate workers for committing not to join a labor union. The third example provides a rationale for the ban against vote trading.

Original languageEnglish
Pages (from-to)685-703
Number of pages19
JournalJournal of Law, Economics, and Organization
Volume15
Issue number3
DOIs
StatePublished - Oct 1999

Fingerprint

Dive into the research topics of 'The freedom to contract and the free-rider problem'. Together they form a unique fingerprint.

Cite this