Hastings Law Journal


The problem of imperfect information permeates discussions of both contract and tort law. Consumers, lacking perfect information, are unable to demand efficient contractual or warranty terms, and so producers choose not to provide them. Many scholars, however, have argued that an informed minority can prevent this problem. If a sufficient number of consumers are informed about the efficient terms and demand those terms, they argue, producers will respond by providing efficient terms to all consumers.

In this Article, the authors examine the informed minority argument and the debate that it has generated. In so doing, they develop a formal model of an informed minority within a given marketplace. They then assess the conditions necessary for an informed minority actually to produce efficient terms for all consumers. Ultimately, the authors conclude that, although theoretically plausible, an informed minority in practice cannot be expected to correct for imperfect information. Market incentives render the existence of a substantial informed minority extremely unlikely. Moreover, consumer differences and market differentiation ensure that even if such a minority exists, it will not produce efficient terms for all consumers.

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