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The Evolution and Persistence of Optimism in Litigation

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  • Oren Bar-Gill
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    Abstract

    Empirical evidence suggests that lawyers and litigants are systematically optimistic with respect to the outcome at trial. Using evolutionary game theory, this article seeks to provide a theoretical explanation for the persistence of the optimism bias. The adaptive force of optimism derives from its function as a commitment device in the pretrial bargaining stage. Optimistic lawyers, by credibly threatening to resort to costly litigation, succeed in extracting more favorable settlements. Therefore, market-selection forces and cultural transmission dynamics dictate an equilibrium with a positive level of optimism. Understanding the dynamics leading to optimism provides new insight regarding the different factors that influence the level of this cognitive bias. In particular, it is shown that the design of legal rules affects the equilibrium level of optimism, which in turn affects the relative efficiency of the different legal designs. Methodologically, by enabling a more systematic exploration of the perception-shaping role of the law, this article seeks to expand the conventional boundaries of behavioral law and economics. Copyright 2006, Oxford University Press.

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    File URL: http://hdl.handle.net/10.1093/jleo/ewj016
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    Bibliographic Info

    Article provided by Oxford University Press in its journal The Journal of Law, Economics, and Organization.

    Volume (Year): 22 (2006)
    Issue (Month): 2 (October)
    Pages: 490-507

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    Handle: RePEc:oup:jleorg:v:22:y:2006:i:2:p:490-507

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    Cited by:
    1. Alexander Stremitzer, 2008. "Plaintiffs exploiting Plaintiffs," Bonn Econ Discussion Papers bgse2_2008, University of Bonn, Germany.
    2. J.J. Prescott & Kathryn E. Spier & Albert Yoon, 2014. "Trial and Settlement: A Study of High-Low Agreements," NBER Working Papers 19873, National Bureau of Economic Research, Inc.
    3. Dari-Mattiacci, Giuseppe & Deffains, Bruno & Lovat, Bruno, 2011. "The dynamics of the legal system," Journal of Economic Behavior & Organization, Elsevier, vol. 79(1-2), pages 95-107, June.
    4. Deffains, Bruno & Langlais, Eric, 2008. "Legal Interpretative Process and Litigants’ Cognitive Biases," MPRA Paper 14370, University Library of Munich, Germany.

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