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Behavioral Biases and the Law

  • Barbara Luppi EMAIL logo
Published/Copyright: December 6, 2021
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Abstract

Empirical and experimental evidence shows that individuals exhibit behavioral biases in their decision-making processes that depart from the full rationality paradigm. This paper discusses the effectiveness of alternative debiasing strategies, designed to induce socially preferable outcomes. Following Jolls, C. and Sunstein, C.R. (2006). Debiasing through law. J. Leg. Stud. 35: 199–242, this paper examines legal strategies that aim at “debiasing through law”, attempting to reduce or eliminate boundedly rational behavior. Alternatively, policymakers can implement “insulating” legal strategies that separate the outcome from the biased behavior, without attempting to eradicate behavioral biases from the decision-making process. This paper compares these strategies in many areas, such as tort law, consumer safety law, and property law.

JEL Codes: K13; K43; D03; D81

Corresponding author: Barbara Luppi, Department of Economics and Center for Economic Research (RECENT), University of Modena and Reggio Emilia, John Hopkins University, SAIS, Bologna, Italy, E-mail:

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Published Online: 2021-12-06

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