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Behavioral Biases and the Law

Author

Listed:
  • Luppi Barbara

    (Department of Economics and Center for Economic Research (RECENT), University of Modena and Reggio Emilia, John Hopkins University, SAIS, Bologna, Italy)

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.

Suggested Citation

  • Luppi Barbara, 2021. "Behavioral Biases and the Law," Review of Law & Economics, De Gruyter, vol. 17(2), pages 453-464, July.
    • Handle: RePEc:bpj:rlecon:v:17:y:2021:i:2:p:453-464:n:2
    DOI: 10.1515/rle-2021-0065
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    More about this item

    Keywords

    bounded rationality; optimism bias; debiasing strategy; K13; K43; D03; D81;
    All these keywords.

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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