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An Analysis of Bounded Rationality in Judicial Litigations: The Case with Loss/Disappointment Averse Plaintiffs

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  • Eric Langlais

    ()
    (EconomiX (CNRS and Paris Ouest-Nanterre) and Laboratoire d’Economie Forestière (INRA-AgroParisTech, Nancy))

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.

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Article provided by ASERS Publishing in its journal Journal of Advanced Research in Law and Economics.

Volume (Year): I (2010)
Issue (Month): 1 (June)
Pages: 41-50

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Handle: RePEc:srs:jarle1:4:v:1:y:2010:i:1:p:41-50

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Keywords: conflicts; litigation; negotiation; disappointment aversion;

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  1. Lucian Arye Bebchuk, 1984. "Litigation and Settlement under Imperfect Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 404-415, Autumn.
  2. Andrea Ichino & Michele Polo & Enrico Rettore, . "Are Judges Biased by Labor Market Conditions?," Working Papers 192, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  3. George L. Priest & Benjamin Klein, 1984. "The Selection of Disputes for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 13(1), pages 1-56, January.
  4. Linda Babcock & George Loewenstein, 1997. "Explaining Bargaining Impasse: The Role of Self-Serving Biases," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 109-126, Winter.
  5. Viscusi, W Kip, 2001. "Jurors, Judges, and the Mistreatment of Risk by the Courts," The Journal of Legal Studies, University of Chicago Press, vol. 30(1), pages 107-42, January.
  6. Ulrich Schmidt & Horst Zank, 2005. "What is Loss Aversion?," Journal of Risk and Uncertainty, Springer, vol. 30(2), pages 157-167, January.
  7. Farber, Henry S & Bazerman, Max H, 1987. "Why Is There Disagreement in Bargaining?," American Economic Review, American Economic Association, vol. 77(2), pages 347-52, May.
  8. Grant, Simon & Kajii, Atsushi & Polak, Ben, 2001. "Different notions of disappointment aversion," Economics Letters, Elsevier, vol. 70(2), pages 203-208, February.
  9. Farmer, Amy & Pecorino, Paul, 2002. "Pretrial bargaining with self-serving bias and asymmetric information," Journal of Economic Behavior & Organization, Elsevier, vol. 48(2), pages 163-176, June.
  10. Gul, Faruk, 1991. "A Theory of Disappointment Aversion," Econometrica, Econometric Society, vol. 59(3), pages 667-86, May.
  11. Hausken, Kjell, 2005. "The battle of the sexes when the future is important," Economics Letters, Elsevier, vol. 87(1), pages 89-93, April.
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