Having more choices in a contract can actually make you poorer.
April 14, 2026
Original Paper
The Double Edge of Freedom of Contract
SSRN · 6563098
The Takeaway
While economics usually assumes more options are better, "freedom of contract" often gives the stronger party new ways to demand concessions. By expanding the menu of choices, the weaker party is forced to trade away more value just to reach an agreement.
From the abstract
Standard economic reasoning suggests that expanding an individual's choice set cannot reduce welfare because additional options may always be ignored. This intuition underlies the traditional economic justification for freedom of contract. This paper shows that the monotonic relationship between choice and welfare may break down in bargaining environments characterized by asymmetric bilateral monopoly and unequal costs of disagreement. In such settings, some contractual options do not improve th