AN ANALYSIS OF BOUNDED RATIONALITY IN JUDICIAL LITIGATIONS: THE CASE WITH LOSS/DISAPPOINTMENT AVERSE PLAINTIFFS
Abstract
For psychologists, bounded rationality reflects the presence of cognitive dissonance and/or inconsistency, revealing that people use heuristics (Tversky, and Kahneman 1974) rather than sophisticated processes for the assessment of their beliefs. Recent research analyzing litigations and pretrial negotiations also focused on boundedly rational litigants (Bar-Gill 2005; Farmer, and Peccorino 2002) relying on a naïve modelling of the self-serving bias. Our paper in contrast introduces the case for disappointment averse litigants, relying on the axiomatic of Gull (1991). We show that this leads to a richer analysis in comparative statics; at the same time, this proves to be … disappointing: for the purposes of public policies in favour of the access to justice, recommendations are quite ambiguous.References
[2] Bar-Gill, O. 2002. The success and survival of cautious optimism: legal rules and endogenous perceptions in pre-trial settlement negotiations, Discussion Paper No. 375, John M. Olin Center for Law, Economics and Business, Harvard Law School.
[3] Bar-Gill, O. 2005. The evolution and persistence of optimism in litigation, Journal of Law, Economics & Organization 22, 490-507.
[4] Bebchuk, L.A. 1984. Litigation and settlement under imperfect information, Rand Journal of Economics 15, 404-415.
[5] Daughety, A. 2000. Settlement, in: B. Bouckaert, G. De Geest, Encyclopedia of Law and Economics, Cheltenham, UK, Edward Elgar.
[6] Farber, H., Bazerman, M. 1987. Why is there disagreement in bargaining, American Economic Reviewl 77, 347-352.
[7] Farmer, A., Pecorino, P. 2002. Pretrial bargaining with self-serving bias and asymmetric information, Journal of Economic Behavior & Organization 48, 163-176.
[8] Grant, S., Kajii, A., and Pollak, B. 2001. Different notions of disappointment aversion, Economics Letters 70, 203-208.
[9] Gul, F. 1991. A theory of disappointment aversion, Econometrica 59, 667-686.
[10] Hausken, K. 2005. The battle of the sex with the future is important, Economics Letters, vol 87, pp 89-93.
[11] Ichino, A., Polo, M., and Rettore, E. 2003. Are judges biased by labor market conditions?, European Economic Review 47, 913-944.
[12] Langlais, E., Chappe, N. 2009. Analyse économique de la résolution des litiges, Section 4 in: Analyse Economique du Droit – Principes, Méthodes, Résultats, B. Deffains and E . Langlais (Eds), de Boeck Université.
[13] Marinescu, I. 2005. Are judges sensitive to economic conditions? Evidence from UK employment tribunals, Working paper, London School of Economics.
[14] Priest, G.L., Klein, B. 1984. The selection of disputes for litigation, Journal of Legal Studies 13, 155.
[15] Rachlinski, J., Guthrie, C., and Wistrich, H. 2007. Heuristics and Biases in Specialized Judges : The Case of Bankruptcy Judges, Journal of Institutional and Theoretical Economics 163, 167-198.
[16] Schmidt, U., Zank, H. 2005. What is loss aversion?, Journal of Risk and Uncertainty 30, 157-167.
[17] Shavell, S. 1982. Suits, settlement and trial: a theoretical analysis under alternative methods for the allocation of legal costs, Journal of Legal Studies.11, 55-81.
[18] Tversky, A., Kahneman, D. 1974. Judgment under uncertainty: Heuristics and biases, Science 185, 1124-1131.
[19] Viscusi, K. 2001. Jurors, judges and the mistreatment of risk by the courts, Journal of Legal Studies 30, 107-142.
Keywords
The Copyright Transfer Form to ASERS Publishing (The Publisher)
This form refers to the manuscript, which an author(s) was accepted for publication and was signed by all the authors.
The undersigned Author(s) of the above-mentioned Paper here transfer any and all copyright-rights in and to The Paper to The Publisher. The Author(s) warrants that The Paper is based on their original work and that the undersigned has the power and authority to make and execute this assignment. It is the author's responsibility to obtain written permission to quote material that has been previously published in any form. The Publisher recognizes the retained rights noted below and grants to the above authors and employers for whom the work performed royalty-free permission to reuse their materials below. Authors may reuse all or portions of the above Paper in other works, excepting the publication of the paper in the same form. Authors may reproduce or authorize others to reproduce the above Paper for the Author's personal use or for internal company use, provided that the source and The Publisher copyright notice are mentioned, that the copies are not used in any way that implies The Publisher endorsement of a product or service of an employer, and that the copies are not offered for sale as such. Authors are permitted to grant third party requests for reprinting, republishing or other types of reuse. The Authors may make limited distribution of all or portions of the above Paper prior to publication if they inform The Publisher of the nature and extent of such limited distribution prior there to. Authors retain all proprietary rights in any process, procedure, or article of manufacture described in The Paper. This agreement becomes null and void if and only if the above paper is not accepted and published by The Publisher, or is with drawn by the author(s) before acceptance by the Publisher.