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The Questionable Efficiency of the Efficient-Breach Doctrine

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  • Daphna Lewinsohn-Zamir

Abstract

The doctrine of efficient breach is based on the belief that the risk of postcontractual bargaining failure under property rules is greater than the risk of the courts' miscalculation of damages under liability rules. The article presents the findings of two experiments that challenge this belief and suggest that courts systematically undercompensate promisees. Implementation of the efficient-breach doctrine might therefore lead to underdeterrence and inefficiency.

Suggested Citation

  • Daphna Lewinsohn-Zamir, 2012. "The Questionable Efficiency of the Efficient-Breach Doctrine," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(1), pages 5-26, March.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201203)168:1_5:tqeote_2.0.tx_2-w
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    References listed on IDEAS

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    1. Peter Diamond & Hannu Vartiainen, 2007. "Introduction to Behavioral Economics and Its Applications," Introductory Chapters,in: Peter Diamond & Hannu Vartiainen (ed.), Behavioral Economics and Its Applications Princeton University Press.
    2. Broome,John, 1999. "Ethics out of Economics," Cambridge Books, Cambridge University Press, number 9780521642750, December.
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    Cited by:

    1. Urs Schweizer, 2012. "The Questionable Efficiency of the Efficient-Breach Doctrine," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, pages 32-37.
    2. Oren Bar-Gill & Christoph Engel, 2016. "Bargaining in the Absence of Property Rights: An Experiment," Journal of Law and Economics, University of Chicago Press, vol. 59(2), pages 477-495.
    3. Alan D. Schwartz, 2012. "The Questionable Efficiency of the Efficient-Breach Doctrine," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, pages 27-31.
    4. Engel, Christoph & Beckenkamp, Martin & Glöckner, Andreas & Irlenbusch, Bernd & Hennig-Schmidt, Heike & Kube, Sebastian & Kurschilgen, Michael & Morell, Alexander & Nicklisch, Andreas & Normann, Hans-, 2014. "First impressions are more important than early intervention: Qualifying broken windows theory in the lab," International Review of Law and Economics, Elsevier, pages 126-136.

    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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