This chapter gives an overview of arguments prominent in the economics of suretyship law. The intention was to show that economics may help answer some puzzling questions of suretyship law, but also to make some recommendations on how suretyship law may be improved. In order to provide a balanced view, the economic model of sureties who behave rationally was countered by the findings of behavioural economics. The theoretical discussion was supplemented by a comparison of family suretyship law in Germany and England, which showed that different legal orders react differently to the problems that may arise from suretyships. There seems to be two paradigms from which suretyship law may be derived: on the one hand the liberal paradigm, which assumes that sureties act with a high level of rationality and thus views a modest regulation of suretyship transactions as sufficient; and on the other hand the paternalistic paradigm, which assumes subjects are only bounded rationally and have to be protected against their sometimes irrational behaviour.

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Erasmus School of Law

Heine, K, & Janal, R. (2011). Suretyships and Consumer Protection in the European Union through the Glasses of Law and Economics. doi:10.1093/acprof:oso/9780199594559.003.0002