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The “Reasonable Consumer” Standard for Product Labeling

Frances Xu Lee

American Law and Economics Review2025https://doi.org/10.1093/aler/ahaf004article
AJG 2ABDC B
Weight
0.50

Abstract

The courts often cites a “reasonable consumer” in deciding cases where a positive term on the label is alleged to have misled the consumers. For cases where the labeling language has to be simple while the product quality can be nuanced, this paper examines a few potential legal definitions of “being misled.” Upon seeing a positive term on the product label, a Bayesian consumer forms a belief, which is a distribution of the possible quality levels. A standard that holds a seller liable for using the positive term when the true quality is below a Bayesian consumer’s expectation of the quality or was deemed sufficiently unlikely low by the Bayesian consumer will cause an Akerlof (1978) style unraveling of communication. A lack of informative communication will lead to a lack of ex-ante effort in providing the quality. More efficient labeling behaviors can be encouraged by a belief-independent rule that is achievable by certification.

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https://doi.org/https://doi.org/10.1093/aler/ahaf004

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@article{frances2025,
  title        = {{The “Reasonable Consumer” Standard for Product Labeling}},
  author       = {Frances Xu Lee},
  journal      = {American Law and Economics Review},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1093/aler/ahaf004},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.