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Mechanism of Instrumental Game Theory in The Legal Process via Stochastic Options Pricing Induction

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  • Kwadwo Osei Bonsu
  • Shoucan Chen

Abstract

Economic theory has provided an estimable intuition in understanding the perplexing ideologies in law, in the areas of economic law, tort law, contract law, procedural law and many others. Most legal systems require the parties involved in a legal dispute to exchange information through a process called discovery. The purpose is to reduce the relative optimisms developed by asymmetric information between the parties. Like a head or tail phenomenon in stochastic processes, uncertainty in the adjudication affects the decisions of the parties in a legal negotiation. This paper therefore applies the principles of aleatory analysis to determine how negotiations fail in the legal process, introduce the axiological concept of optimal transaction cost and formulates a numerical methodology based on backwards induction and stochastic options pricing economics in estimating the reasonable and fair bargain in order to induce settlements thereby increasing efficiency and reducing social costs.

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  • Kwadwo Osei Bonsu & Shoucan Chen, 2020. "Mechanism of Instrumental Game Theory in The Legal Process via Stochastic Options Pricing Induction," Papers 2006.11061, arXiv.org.
    • Handle: RePEc:arx:papers:2006.11061
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    Cited by:

    1. Bonsu Kwadwo Osei, 2021. "Axiomatic Formulation of the Optimal Transaction Cost Theory in the Legal Process Through Cobb-Douglas Optimization," Economic and Regional Studies / Studia Ekonomiczne i Regionalne, Sciendo, vol. 14(3), pages 385-389, September.
    2. Osei Bonsu, Kwadwo, 2021. "Axiomatic Formulation Of The Optimal Transaction Cost Theory In The Legal Process Through Cobb-Douglas Optimization," Economic and Regional Studies (Studia Ekonomiczne i Regionalne), John Paul II University of Applied Sciences in Biala Podlaska, vol. 14(3), September.

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