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Uncertainty of Law and the Legal Process

  • Giuseppe Dari-Mattiacci
  • Bruno Deffains

There is extensive literature on whether courts or legislators produce efficient rules, but which of them produces rules efficiently? The law is subject touncertainty ex ante; uncertainty makes the outcomes of trials difficult to predict and deters parties from settling disputes out of court. In contrast, thelaw is certain ex post: litigation fosters the creation of precedents that reduce uncertainty. We postulate that there is a natural balance between the degree of uncertainty of a legal system (kept under control by litigation) and its litigation rate (sustained by uncertainty). We describe such equilibrium rates in a model of tort litigation, study how they are affected by different policies, and compare the costs and benefits of the legislative and the judicial process of lawmaking..

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Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 163 (2007)
Issue (Month): 4 (December)
Pages: 627-656

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200712)163:4_627:uolatl_2.0.tx_2-z
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