The Case for Freedom of Contract Coase Theorem in a low transaction cost context What about a monopoly seller? It still pays me to include features that benefit you more than they cost me But contract terms can be used for price discrimination An alternative to charging those who value the product more a higher price Provide a contract tuned in favor of the marginal customer Even if doing so is inefficient The result does not hold if price is fixed:an apartment under rent control It pays the landlord to lower quality if doing so saves him money Even if it is inefficient So there is an argument for mandatory terms(and for abolishing rent control)The Case for Freedom of Contract • Coase Theorem in a low transaction cost context • What about a monopoly seller? • It still pays me to include features that benefit you more than they cost me • But contract terms can be used for price discrimination • An alternative to charging those who value the product more a higher price • Provide a contract tuned in favor of the marginal customer • Even if doing so is inefficient • The result does not hold if price is fixed: an apartment under rent control • It pays the landlord to lower quality if doing so saves him money • Even if it is inefficient • So there is an argument for mandatory terms (and for abolishing rent control)