Archivio per 9 novembre 2013

09
Nov
13

The Status Quo Bias and Contract Default Rules by Russell B. Korobkin :: SSRN

See on Scoop.itBounded Rationality and Beyond

Abstract:      
The rich law and economics literature on contract default rules – that is, terms that govern relationships between contracting parties only if those parties do not explicitly agree to other terms – presumes that the legal system’s choice of default rules will not affect individual negotiators’ underlying preferences for contract terms. Judgment and decision making literature on the “status quo bias” suggests that if bargainers perceive default terms as part of the status quo they will prefer the substantive content of those terms more than they would if other terms were the legal defaults. This paper presents a study designed to test this hypothesis. 

151 law students were asked to provide advice to a client in a number of hypothetical contract negotiation scenarios with the content of the default terms manipulated between experimental groups. The results suggest that the choice of legal default terms affects not only what terms contracting parties will agree upon but also what terms they actually prefer. The paper presents the experimental results, considers various theoretical explanations for the results, and suggests how the results should impact legal scholars’ analysis of what contract default rules are optimally efficient. 

See on papers.ssrn.com

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09
Nov
13

The Status Quo Bias and Contract Default Rules by Russell B. Korobkin :: SSRN

See on Scoop.itBounded Rationality and Beyond

Abstract:      
The rich law and economics literature on contract default rules – that is, terms that govern relationships between contracting parties only if those parties do not explicitly agree to other terms – presumes that the legal system’s choice of default rules will not affect individual negotiators’ underlying preferences for contract terms. Judgment and decision making literature on the “status quo bias” suggests that if bargainers perceive default terms as part of the status quo they will prefer the substantive content of those terms more than they would if other terms were the legal defaults. This paper presents a study designed to test this hypothesis. 

151 law students were asked to provide advice to a client in a number of hypothetical contract negotiation scenarios with the content of the default terms manipulated between experimental groups. The results suggest that the choice of legal default terms affects not only what terms contracting parties will agree upon but also what terms they actually prefer. The paper presents the experimental results, considers various theoretical explanations for the results, and suggests how the results should impact legal scholars’ analysis of what contract default rules are optimally efficient. 

See on papers.ssrn.com

09
Nov
13

A ‘Traditional’ and ‘Behavioral’ Law-and-Economics Analysis of Williams v. Walker-Thomas Furniture Company by Russell B. Korobkin :: SSRN

See on Scoop.itBounded Rationality and Beyond

Abstract:      

Williams v. Walker-Thomas Furniture Company is a casebook favorite, taught in virtually every first-year Contract Law class. In the case, the D.C. Circuit holds that courts have the power to deny enforcement of contract terms if the terms are “unconscionable,” and it remands the case to the lower court to consider whether the facts of the case meet this standard. This article, written for a session of the 2004 AALS Annual Meeting sponsored by the Contracts Section, analyzes the question that the D.C. Circuit posed to the lower court in Williams – and that Contracts teachers routinely pose to their students – from a “traditional” law-and-economics perspective, and from a “behavioral” law-and-economics perspective.
See on papers.ssrn.com

09
Nov
13

A ‘Traditional’ and ‘Behavioral’ Law-and-Economics Analysis of Williams v. Walker-Thomas Furniture Company by Russell B. Korobkin :: SSRN

See on Scoop.itBounded Rationality and Beyond

Abstract:      

Williams v. Walker-Thomas Furniture Company is a casebook favorite, taught in virtually every first-year Contract Law class. In the case, the D.C. Circuit holds that courts have the power to deny enforcement of contract terms if the terms are “unconscionable,” and it remands the case to the lower court to consider whether the facts of the case meet this standard. This article, written for a session of the 2004 AALS Annual Meeting sponsored by the Contracts Section, analyzes the question that the D.C. Circuit posed to the lower court in Williams – and that Contracts teachers routinely pose to their students – from a “traditional” law-and-economics perspective, and from a “behavioral” law-and-economics perspective.
See on papers.ssrn.com

09
Nov
13

What Comes After Victory for Behavioral Law and Economics? by Russell B. Korobkin :: SSRN

See on Scoop.itBounded Rationality and Beyond

Abstract:      

The battle to separate the economic analysis of legal rules and institutions from the straightjacket of strict rational choice assumptions has been won by the proponents of behavioral law and economics. With the revealed preferences assumption of neoclassical economics – that individual behavior necessarily maximizes subjective expected utility – discarded, what comes next for the discipline of law and economics? The article argues that theorists should turn their attention to a series of philosophical and methodological problems that surround the measurement of subjective expected utility: (1) the need to recognize and value autonomy for its own sake, separate from its ability to enhance utility; (2) the need to advance a theory of subjective utility that takes into account the use of heuristics in the construction of preferences as well as in understanding facts and judging probabilities; and (3) the need to recognize and confront the consequences of individual difference in the extent of bounded rationality.
See on papers.ssrn.com

09
Nov
13

What Comes After Victory for Behavioral Law and Economics? by Russell B. Korobkin :: SSRN

See on Scoop.itBounded Rationality and Beyond

Abstract:      

The battle to separate the economic analysis of legal rules and institutions from the straightjacket of strict rational choice assumptions has been won by the proponents of behavioral law and economics. With the revealed preferences assumption of neoclassical economics – that individual behavior necessarily maximizes subjective expected utility – discarded, what comes next for the discipline of law and economics? The article argues that theorists should turn their attention to a series of philosophical and methodological problems that surround the measurement of subjective expected utility: (1) the need to recognize and value autonomy for its own sake, separate from its ability to enhance utility; (2) the need to advance a theory of subjective utility that takes into account the use of heuristics in the construction of preferences as well as in understanding facts and judging probabilities; and (3) the need to recognize and confront the consequences of individual difference in the extent of bounded rationality.
See on papers.ssrn.com




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