2017 Fiscal Year Final Research Report
Japanese Contract Law Reform and the Effect on the Japanese real estate markets
| Project/Area Number |
26504011
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Multi-year Fund |
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| Section | 一般 |
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| Research Field |
土地・住宅・不動産研究
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| Research Institution | Senshu University |
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Principal Investigator |
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| Project Period (FY) |
2014-04-01 – 2018-03-31
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| Keywords | caveat emptor / caveat venditor / adverse selection / quality warranty / insurance contract |
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| Outline of Final Research Achievements |
In this Reserch, I consider a theoretical justification for the legal caveat emptor rule ("let the buyer beware"). Specifically, I examine the doctrines of caveat venditor ("let the seller beware" or seller liability) and caveat emptor and consider which better avoids adverse selection under information asymmetry about the quality of a durable commodity or real property. I mainly consider transactions between individual persons in secondhand market with risk-averse sellers and buyers; in this context, caveat emptor outperforms caveat venditor when there are legal costs, whereas caveat venditor outperforms caveat emptor only when no legal costs exist. Caveat emptor remains superior to caveat venditor when individuals can access a competitive insurance market. Insurance contracts are not as effective under caveat venditor as they are under caveat emptor because caveat venditor leads to excess purchases of insurance contracts or duplicated adverse selection.
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| Free Research Field |
経済学
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