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Judicial detection skill and contractual compliance

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  • Kirstein, Roland
  • Schmidtchen, Dieter

Abstract

Mutually beneficial agreements might fail if the parties fear contractual opportunism. Litigation is supposed to be a remedy, but gives scope for another kind of opportunistic behavior which we call litigational opportunism: Even knowing that the opponent has fulfilled his obligations, a party might bring suit. We introduce a new concept, called judicial detection skill, and show that positive judicial detection skill is a prerequisite if the court system is to deter opportunistic suits and simultaneously induce bilateral contractual compliance. The traditional literature on litigation either assumes judges with zero detection skill, or simply neglects that opportunistic suits might be successful. We prove that those models are unable to provide an answer to the question of how to prevent both types of opportunism simultaneously.
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Suggested Citation

  • Kirstein, Roland & Schmidtchen, Dieter, 1997. "Judicial detection skill and contractual compliance," International Review of Law and Economics, Elsevier, vol. 17(4), pages 509-520, December.
  • Handle: RePEc:eee:irlaec:v:17:y:1997:i:4:p:509-520
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    Citations

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    Cited by:

    1. Kirstein, Roland, 2005. "Bayesian Monitoring," CSLE Discussion Paper Series 2005-06, Saarland University, CSLE - Center for the Study of Law and Economics.
    2. Roland Kirstein, "undated". "The Condorcet Jury-Theorem with Two Independent Error-Probabilities," German Working Papers in Law and Economics 2006-1-1154, Berkeley Electronic Press.
    3. Kirstein, Roland, 2002. "The new Basle Accord, internal ratings, and the incentives of banks," International Review of Law and Economics, Elsevier, pages 393-412.
    4. Schmidtchen, Dieter, 2007. "Vereinheitlichung des Vertragsrechts in Europa - eine Lösung auf der Suche nach dem Problem? Die Sicht der Neuen Institutionenökonomik," CSLE Discussion Paper Series 2007-01, Saarland University, CSLE - Center for the Study of Law and Economics.
    5. Carbonara Emanuela & Parisi Francesco & von Wangenheim Georg, 2015. "Rent-Seeking and Litigation: The Hidden Virtues of Limited Fee Shifting," Review of Law & Economics, De Gruyter, vol. 11(2), pages 113-148, July.
    6. Peter Wijck, 2013. "The economics of pre-crime interventions," European Journal of Law and Economics, Springer, pages 441-458.
    7. G Th, Werner & Ockenfels, Axel, 2005. "The coevolution of morality and legal institutions: an indirect evolutionary approach," Journal of Institutional Economics, Cambridge University Press, vol. 1(02), pages 155-174, December.
    8. Schmidtchen, Dieter, 2000. "Vertrauen und Recht: eine ökonomische Analyse," CSLE Discussion Paper Series 2000-04, Saarland University, CSLE - Center for the Study of Law and Economics.
    9. Schmidtchen, Dieter, 2006. "Wettbewerbsfreiheit, Per se Verbote und die Rule of Reason: Anmerkungen zum institutionenökonomisch-evolutionären Wettbewerbsleitbild," CSLE Discussion Paper Series 2006-04, Saarland University, CSLE - Center for the Study of Law and Economics.
    10. Kirstein, Roland & Gerhard, Hans, 2005. "The "Rainmaker's Dilemma": Bad Debt Loss Insurance in Settlement and Litigation," CSLE Discussion Paper Series 2005-02, Saarland University, CSLE - Center for the Study of Law and Economics.
    11. Schmidt-Trenz, Hans-Jörg & Schmidtchen, Dieter, 2006. "Territoriality of Law and the International Trade Game: Towards a New Institutional Economics of International Transactions," CSLE Discussion Paper Series 2006-06, Saarland University, CSLE - Center for the Study of Law and Economics.
    12. Dieter Schmidtchen, "undated". "Wettbewerbsfreiheit, Per se Verbote und die Rule of Reason – Anmerkungen zum institutionenökonomisch-evolutionären Wettbewerbsleitbild
      Freedom to compete, per se rules and the rule of reason – Re
      ," German Working Papers in Law and Economics 2006-1-1159, Berkeley Electronic Press.
    13. Kirstein, Roland & Rickman, Neil, 2001. "FORIS contracts: Litigation Cost Shifting and Contingent Fees in Germany," CSLE Discussion Paper Series 2001-04, Saarland University, CSLE - Center for the Study of Law and Economics.
    14. Schmidtchen, Dieter, 2002. "Wozu Strafrecht? Another View of the Cathedral," CSLE Discussion Paper Series 2002-14, Saarland University, CSLE - Center for the Study of Law and Economics.
    15. Neil Rickman & Dionisia Tzavara, 2005. "Optimal Pricing of Court Services," European Journal of Law and Economics, Springer, pages 31-41.
    16. Roland Kirstein & Neil Rickman, 2004. ""Third Party Contingency" Contracts in Settlement and Litigation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, pages 555-555.
    17. Kirstein, Roland & Schmidtchen, Dieter & Neunzig, Alexander R., 2004. "Conflict of law rules and international trade : a transaction costs approach," CSLE Discussion Paper Series 2004-01, Saarland University, CSLE - Center for the Study of Law and Economics.
    18. Schmidtchen, Dieter, 1999. "To Help or not to Help: The Samaritan's Dilemma Revisited," CSLE Discussion Paper Series 99-09, Saarland University, CSLE - Center for the Study of Law and Economics.
    19. Schmidtchen Dieter, 2006. "Wettbewerbsschutz durch regelgeleitete Wettbewerbspolitik – Anmerkungen zum institutionenökonomisch-evolutionären Wettbewerbsleitbild / Protecting competition by a rule governed policy – Remarks on th," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 57(1), pages 165-189, January.
    20. Schmidtchen, Dieter, 2000. "Homo oeconomicus und das Recht," CSLE Discussion Paper Series 2000-03, Saarland University, CSLE - Center for the Study of Law and Economics.
    21. Schmidtchen, Dieter, 2006. "Wettbewerbsschutz durch regelgeleitete Wettbewerbspolitik: Anmerkungen zum institutionenökonomisch-evolutionären Wettbewerbsleitbild," CSLE Discussion Paper Series 2006-10, Saarland University, CSLE - Center for the Study of Law and Economics.
    22. Kirstein, Roland & Kittner, Michael & Schmidtchen, Dieter, 2000. "Kündigungsschutzrecht in den USA und in Deutschland: ein Beitrag zur ökonomischen Rechtsvergleichung," CSLE Discussion Paper Series 2000-08, Saarland University, CSLE - Center for the Study of Law and Economics.
    23. Christmann Robin, 2015. "Tipping the Scales – Settlement, Appeal and the Relevance of Judicial Ambition," Review of Law & Economics, De Gruyter, vol. 11(2), pages 171-207, July.
    24. Robin Christmann, 2014. "No Judge, No Job! Court errors and the contingent labor contract," European Journal of Law and Economics, Springer, pages 409-429.
    25. Roland Kirstein, 2008. "Effizienzaspekte alternativer Streitbeilegung," FEMM Working Papers 08021, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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