Startseite The Role of Bias in Economic Models of Law
Artikel
Lizenziert
Nicht lizenziert Erfordert eine Authentifizierung

The Role of Bias in Economic Models of Law

  • Thomas J. Miceli EMAIL logo und Kathleen Segerson
Veröffentlicht/Copyright: 8. November 2021
Veröffentlichen auch Sie bei De Gruyter Brill
Manuskript einreichen Informationen für Autor*innen
Review of Law & Economics
Aus der Zeitschrift Review of Law & Economics Band 17 Heft 2

Abstract

Behavioral economics has highlighted the impact of various biases on economic outcomes. This essay reviews how biases have been incorporated into economic models of the law and the resulting implications for the assessment of different legal rules and policies. It focuses on two contexts. The first concerns biases that affect consumer purchases of risky products. Using a standard accident model that incorporates various forms of consumer bias, we discuss how bias can affect the efficient assignment of liability for product-related accidents. The second context concerns biases that affect the administration of law, particularly regarding the adjudication of guilt, the lawmaking function of trials, and criminal sentencing. We examine procedural rules like precedent and sentencing guidelines, both of which are aimed at curtailing judicial bias.

Keywords: behavioral economics; bias; risk perceptions; legal error; judicial bias
JEL Classification: D9; D91; K13; K15; K41; K42
Corresponding author: Thomas J. Miceli, Department of Economics, University of Connecticut, Storrs 06269, CT, USA, E-mail:

Acknowledgments

We acknowledge the comments of Francesco Parisi.

Appendix A

This appendix proves that s * < 1 in the present-bias model when β < 1. Equilibrium consumption in this case, q ̂ ( s ) , is defined by (23), and equilibrium safety, π ̂ ( s ) , is defined by (25). Following Friehe et al. (2020), we treat welfare as being independent of consumer bias and therefore write it as

(A1) W s = ∫ 0 q ̂ ( s ) b z d z − c π ̂ s q ̂ s − π ̂ s D q ̂ s

The derivative of this expression with respect to s gives

(A2) ∂ W ∂ s = b q ̂ − c π ̂ − π ̂ D ∂ q ̂ ∂ s − c ′ π ̂ + D ∂ π ̂ ∂ s

After substituting from (23) and (25), this becomes

(A3) ∂ W ∂ s = b q ̂ ( 1 − β ) − 1 − ( s + β 1 − s ) π ̂ D ∂ q ̂ ∂ s − 1 − s + β 1 − s D q ̂ ∂ π ̂ ∂ s

Evaluating this expression at s = 1 gives

(A4) ∂ W ∂ s | s = 1 = b q ̂ 1 − β ∂ q ̂ ∂ s

Finally, from (23) we have

(A5) ∂ q ̂ ∂ s = ( 1 − β ) π ̂ D β b ′ < 0

from which it follows that (A4) is negative, thus proving that s * < 1.

References

Adelstein, R. (2017). The exchange order: property and liability as an economic system. Oxford University Press, New York.10.1093/oso/9780190694272.001.0001Suche in Google Scholar

Arlen, J. (1998). Comment: the future of behavioral economic analysis of law. Vanderbilt Law Rev. 51: 1765–1788.Suche in Google Scholar

Baniak, A. and Grajzl, P. (2017). Optimal liability when consumers mispredict product usage. Am. Law Econ. Rev. 19: 202–243.10.2139/ssrn.2763632Suche in Google Scholar

Bebchuk, L. (1984). Litigation and settlement under imperfect information. Rand J. Econ. 15: 404–415. https://doi.org/10.2307/2555448.Suche in Google Scholar

Becker, G. (1968). Crime and punishment: an economic approach. J. Polit. Econ. 76: 169–217. https://doi.org/10.1086/259394.Suche in Google Scholar

Champion, D. (1989). The U.S. sentencing guidelines: implications for criminal justice. Praeger, New York.Suche in Google Scholar

Choi, A.H. and Spier, K. (2014). Should consumers be permitted to waive products liability? Product safety, private contracts, and adverse selection. J. Law Econ. Organ. 30: 734–766. https://doi.org/10.1093/jleo/ewt019.Suche in Google Scholar

Cooter, R. and Kornhauser, L. (1980). Can litigation improve the law without the help of judges? J. Leg. Stud. 9: 139–163. https://doi.org/10.1086/467632.Suche in Google Scholar

Cooter, R., Kornhauser, L., and Lane, D. (1979). Liability rules, limited information, and the role of precedent. Bell J. Econ. 10: 366–373. https://doi.org/10.2307/3003338.Suche in Google Scholar

Cooter, R. and Rubinfeld, D. (1989). Economic analysis of legal disputes and their resolution. J. Econ. Lit. 27: 1067–1097.Suche in Google Scholar

Friedman, L. (2004). Law in America: a short history. Modern Library, New York.Suche in Google Scholar

Friehe, T., Rößler, C., and Dong, X. (2020). Liability for third-party harm when harm-inflicting consumers are present biased. Am. Law Econ. Rev. 22: 75–104. https://doi.org/10.1093/aler/ahz013.Suche in Google Scholar

Gennaioli, N. and Shleifer, A. (2007a). The evolution of common law. J. Polit. Econ. 115: 43–68. https://doi.org/10.1086/511996.Suche in Google Scholar

Gennaioli, N. and Shleifer, A. (2007b). Overruling and the instability of law. J. Comp. Econ. 35: 309–328. https://doi.org/10.1016/j.jce.2007.02.003.Suche in Google Scholar

Goodman, J. (1978). An economic analysis of the evolution of the common law. J. Leg. Stud. 7: 393–406. https://doi.org/10.1086/467600.Suche in Google Scholar

Gould, J. (1973). The economics of legal conflicts. J. Leg. Stud. 2: 279–300. https://doi.org/10.1086/467499.Suche in Google Scholar

Gul, F. and Pesendorfer, W. (2001). Temptation and self-control. Econometrica 69: 1403–1435. https://doi.org/10.1111/1468-0262.00252.Suche in Google Scholar

Gul, F. and Pesendorfer, W. (2004). Self-control, revealed preference and consumption choice. Rev. Econ. Dynam. 7: 243–264. https://doi.org/10.1016/j.red.2003.11.002.Suche in Google Scholar

Harris, J. (1970). On the economics of law and order. J. Polit. Econ. 78: 165–174. https://doi.org/10.1086/259616.Suche in Google Scholar

Hay, B. and Spier, K. (2005). Manufacturer liability for harms caused to others. Am. Econ. Rev. 95: 1700–1711. https://doi.org/10.1257/000282805775014416.Suche in Google Scholar

Heiner, R. (1986). Imperfect decisions and the law: on the evolution of legal precedent and rules. J. Leg. Stud. 15: 227–261. https://doi.org/10.1086/467812.Suche in Google Scholar

Hylton, K. (1990). Litigation and legal error under negligence. J. Law Econ. Organ. 6: 433–452.Suche in Google Scholar

Hylton, K. (1993). Asymmetric information and the selection of disputes for litigation. J. Leg. Stud. 22: 187–210. https://doi.org/10.1086/468172.Suche in Google Scholar

Jolls, C. (1998). Behavioral economic analysis of redistributive legal rules. Vanderbilt Law Rev. 51: 1653–1677.10.1017/CBO9781139175197.012Suche in Google Scholar

Jolls, C. and Sunstein, C. (2006). Debiasing through law. J. Leg. Stud. 35: 199–241. https://doi.org/10.1086/500096.Suche in Google Scholar

Jolls, C., Sunstein, C., and Thaler, R. (1998). A behavioral approach to law and economics. Stanford Law Rev. 50: 1471–1550. https://doi.org/10.2307/1229304.Suche in Google Scholar

Kaplow, L. (2011). On the optimal burden of proof. J. Polit. Econ. 119: 1104–1140. https://doi.org/10.1086/664614.Suche in Google Scholar

Kornhauser, L. (1989). An economic perspective on stare decisis. Chic. Kent. Law Rev. 65: 63–92.Suche in Google Scholar

Laibson, D. (1997). Golden eggs and hyperbolic discounting. Q. J. Econ. 112: 443–478. https://doi.org/10.1162/003355397555253.Suche in Google Scholar

Landes, W. (1971). An economic analysis of the courts. J. Law Econ. 14: 61–107. https://doi.org/10.1086/466704.Suche in Google Scholar

Landes, W. and Posner, R. (1985). A positive economic theory of products liability. J. Leg. Stud. 14: 535–567. https://doi.org/10.1086/467785.Suche in Google Scholar

Landes, W. and Posner, R. (1987). The economic structure of Tort law. Harvard University Press, Cambridge, MA.10.4159/harvard.9780674864030Suche in Google Scholar

Luppi, B. and Parisi, F. (2009). Beyond liability: correcting optimism bias through tort law. Queen’s Law J. 35: 47–66.Suche in Google Scholar

Luppi, B. and Parisi, F. (2018). Behavioral models of tort law. In: Teitelbaum, J. and Zeiler, K. (Eds.). Research handbook on behavioral Law and economics. Edward Elgar, Cheltenham, UK, pp. 221–246.10.4337/9781849805681.00017Suche in Google Scholar

Macey, J. (1989). Internal and external costs and benefits of stare decisis. Chic. Kent. Law Rev. 65: 93–113.Suche in Google Scholar

Miceli, T. (1990). Optimal prosecution of defendants whose guilt is uncertain. J. Law Econ. Organ. 6: 189–201.Suche in Google Scholar

Miceli, T. (1991). Optimal criminal procedure: fairness and deterrence. Int. Rev. Law Econ. 11: 3–10. https://doi.org/10.1016/0144-8188(91)90022-6.Suche in Google Scholar

Miceli, T. (2008). Criminal sentencing guidelines and judicial discretion. Contemp. Econ. Policy 26: 207–215.10.1111/j.1465-7287.2007.00065.xSuche in Google Scholar

Miceli, T. (2009a). Criminal procedure. In: Garoupa, N. (Ed.). Criminal law and economics. Edward Elgar, Cheltenham, UK, pp. 125–144.Suche in Google Scholar

Miceli, T. (2009b). Legal change: selection litigation, judicial bias, and precedent. J. Leg. Stud. 38: 157–168. https://doi.org/10.1086/587439.Suche in Google Scholar

Miceli, T. (2010). Legal change and the social value of lawsuits. Int. Rev. Law Econ. 30: 203–208. https://doi.org/10.1016/j.irle.2010.04.002.Suche in Google Scholar

Miceli, T. (2019). The paradox of punishment: reflections on the economics of criminal justice. Palgrave Macmillan, Cham, Switzerland.10.1007/978-3-030-31695-2Suche in Google Scholar

Miceli, T. and Cosgel, M. (1994). Reputation and judicial decision making. J. Econ. Behav. Organ. 23: 31–51. https://doi.org/10.1016/0167-2681(94)90095-7.Suche in Google Scholar

Miceli, T., Segerson, K., and Wang, S. (2015). Products liability when consumers vary in their susceptibility to harm and may misperceive risk. Contemp. Econ. Policy 33: 468–476. https://doi.org/10.1111/coep.12086.Suche in Google Scholar

Parisi, F. and Smith, V.L. (Eds.) (2005). The law and economics of irrational behavior. Stanford University Press, Stanford.10.1515/9781503625174Suche in Google Scholar

Png, I. (1986). Optimal damages and subsidies in the presence of legal error. Int. Rev. Law Econ. 6: 101–105. https://doi.org/10.1016/0144-8188(86)90042-6.Suche in Google Scholar

Polinsky, A.M. and Rogerson, W. (1983). Products liability, consumer misperceptions, and market power. Bell J. Econ. 14: 581–589. https://doi.org/10.2307/3003659.Suche in Google Scholar

Polinsky, A.M. and Shavell, S. (2007). The theory of public law enforcement. In: Polinsky, A. and Shavell, S. (Eds.), Handbook of law and economics, vol. 1. Elsevier, Amsterdam, pp. 403–454.10.3386/w11780Suche in Google Scholar

Polinsky, A.M. and Shavell, S. (2001). Corruption and optimal law enforcement. J. Publ. Econ. 81: 1–24. https://doi.org/10.1016/s0047-2727(00)00127-4.Suche in Google Scholar

Posner, R. (2003). Economic analysis of law, 6th ed. New York: Aspen.Suche in Google Scholar

Priest, G. (1977). Common law process and selection of efficient rules. J. Leg. Stud. 6: 65–82. https://doi.org/10.1086/467563.Suche in Google Scholar

Priest, G. and Klein, B. (1984). The selection of disputes for litigation. J. Leg. Stud. 13: 1–55. https://doi.org/10.1086/467732.Suche in Google Scholar

Reinganum, J. (1988). Plea bargaining and prosecutorial discretion. Am. Econ. Rev. 78: 713–728.Suche in Google Scholar

Rizzo, M. (1987). Rules versus cost-benefit analysis in the common law. In: Dorn, J. and Manne, H. (Eds.). Economic liberties and the judiciary. George Mason University Press, Fairfax, VA.Suche in Google Scholar

Rubin, P. (1977). Why is the common law efficient? J. Leg. Stud. 6: 51–63. https://doi.org/10.1086/467562.Suche in Google Scholar

Segerson, K. and Tsvetanov, T. (2013). Regulation versus liability: a behavioral economics perspective. In: Miceli, T. and Baker, M. (Eds.). Research handbook on economic models of law. Edward Elgar, Cheltenham, UK, pp. 69–86.10.4337/9781781000151.00009Suche in Google Scholar

Shavell, S. (1980). Strict liability versus negligence. J. Leg. Stud. 9: 1–25. https://doi.org/10.1086/467626.Suche in Google Scholar

Shepherd, J. (2007). Blakely’s silver lining: sentencing guidelines, judicial discretion, and crime. Hastings Law J. 58: 533–589.Suche in Google Scholar

Slovic, P., Fischhoff, B., and Lichtenstein, S. (1982). Facts versus fears: understanding perceived risk. In: Kahneman, D., Slovic, P. and Tversky, A. (Eds.). Judgment under uncertainty: Heuristics and biases. Cambridge University Press, Cambridge, MA, pp. 463–492.10.1017/CBO9780511809477.034Suche in Google Scholar

Spence, M. (1977). Consumer misperceptions, product failure, and producer liability. Rev. Econ. Stud. 44: 561–572. https://doi.org/10.2307/2296908.Suche in Google Scholar

Spier, K. (2007). Litigation. In: Polinsky, A. and Shavell, S. (Eds.), Handbook of law and economics, vol. 1. Elsevier, Amsterdam, pp. 259–342.10.1016/S1574-0730(07)01004-3Suche in Google Scholar

Sunstein, C. (1997). Behavioral analysis of law. Univ. Chic. Law Rev. 64: 1175–1195.10.2307/1600213Suche in Google Scholar

Sunstein, C. (Ed.) (2000). Behavioral law & economics. Cambridge University Press, New York.10.1017/CBO9781139175197Suche in Google Scholar

Tsvetanov, T. and Segerson, K. (2013). Re-evaluating the role of energy efficiency standards: a behavioral economics perspective. J. Environ. Econ. Manag. 66: 347–362. https://doi.org/10.1016/j.jeem.2013.04.006.Suche in Google Scholar

Tsvetanov, T., Miceli, T., and Segerson, K. (2021). Products liability with temptation bias. J. Econ. Behav. Organ. 186: 76–93. https://doi.org/10.1016/j.jebo.2021.03.028.Suche in Google Scholar

Tversky, A. and Kahneman, D. (1974). Judgment under uncertainty: heuristics and biases. Science 185: 1124–1131. https://doi.org/10.1126/science.185.4157.1124.Suche in Google Scholar

Ulen, T. (2013). Behavioral law and economics: law, policy, and science. Supreme Court Econ. Rev. 21: 5–42. https://doi.org/10.1086/675264.Suche in Google Scholar

Whitman, D. (2000). Evolution of the common law and the emergence of compromise. J. Leg. Stud. 29: 753–781. https://doi.org/10.1086/468092.Suche in Google Scholar

Zeiler, K. (2019). Mistakes about mistakes. Eur. J. Law Econ. 48: 9–27. https://doi.org/10.1007/s10657-018-9596-5.Suche in Google Scholar
Published Online: 2021-11-08

© 2021 Walter de Gruyter GmbH, Berlin/Boston

Artikel in diesem Heft

  1. Frontmatter
  2. Article
  3. The Impact of Behavioral Economics on the Law: Introduction
  4. Special Issue Articles
  5. The Paternalistic Turn in Behavioral Law and Economics: A Critique
  6. Behavioral Contract Law
  7. The Limits of Behavioral Economics in Tort Law
  8. Behavioral Economics in Plea-Bargain Decision-Making: Beyond the Shadow-of-Trial Model
  9. Behavioral Economics and Court Decision-Making
  10. The Role of Bias in Economic Models of Law
  11. Behavioral Biases and the Law
  12. The Evolutionary Force of Behavioral Economics in Law
https://doi.org/10.1515/rle-2021-0043
Schlagwörter für diesen Artikel
behavioral economics; bias; risk perceptions; legal error; judicial bias

Artikel in diesem Heft

  1. Frontmatter
  2. Article
  3. The Impact of Behavioral Economics on the Law: Introduction
  4. Special Issue Articles
  5. The Paternalistic Turn in Behavioral Law and Economics: A Critique
  6. Behavioral Contract Law
  7. The Limits of Behavioral Economics in Tort Law
  8. Behavioral Economics in Plea-Bargain Decision-Making: Beyond the Shadow-of-Trial Model
  9. Behavioral Economics and Court Decision-Making
  10. The Role of Bias in Economic Models of Law
  11. Behavioral Biases and the Law
  12. The Evolutionary Force of Behavioral Economics in Law
Jetzt anmelden und 20% sparen
Institutioneller Zugang
Wie funktioniert Authentifizierung?
Haben Sie eine Idee, wie wir unsere Website verbessern können?
Bitte schreiben Sie uns.
© 2025 De Gruyter Brill
Heruntergeladen am 11.10.2025 von https://www.degruyterbrill.com/document/doi/10.1515/rle-2021-0043/html
Button zum nach oben scrollen