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Diffusion of Legal Innovations: The Case of Israeli Class Actions

Author

Listed:
  • Christoph Engel

    (Max Planck Institute for Research on Collective Goods)

  • Alon Klement

    (Buchman Faculty of Law, Tel Aviv University)

  • Karen Weinshall Margel

    (Hebrew University of Jerusalem - Faculty of Law)

Abstract

In law and economics, it is standard to model legal rules as an opportunity structure. The law’s subjects maximize expected profit, given these constraints. In such a model, the reaction to legal innovation is immediate. This is not what we observe after class action is introduced into Israeli law. For a long time, the new remedy is almost unused. Then the adoption process gains momentum. We discuss alternative options for theorizing the effect. We find that market entry is not only explained by the available information about profitability, but also by the adoption pattern of others. When deciding whether to bring further claims, law firms also react to the experiences they have made themselves. We thus explain the pattern by individual and social learning, and cannot exclude mere social imitation.

Suggested Citation

  • Christoph Engel & Alon Klement & Karen Weinshall Margel, 2017. "Diffusion of Legal Innovations: The Case of Israeli Class Actions," Discussion Paper Series of the Max Planck Institute for Behavioral Economics 2017_11, Max Planck Institute for Behavioral Economics, revised Jan 2018.
    • Handle: RePEc:mpg:wpaper:2017_11
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    References listed on IDEAS

    as
    1. David Strang, 1991. "Adding Social Structure to Diffusion Models," Sociological Methods & Research, , vol. 19(3), pages 324-353, February.
    2. Alon Klement & Keren Weinshall-Margel, 2016. "Cost-Benefit Analysis of Class Actions: An Israeli Perspective," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(1), pages 75-103, March.
    3. Engel, Christoph, 2008. "Learning the law," Journal of Institutional Economics, Cambridge University Press, vol. 4(3), pages 275-297, December.
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    6. Alon Klement & Keren Weinshall-Margel, 2016. "Cost-Benefit Analysis of Class Actions: An Israeli Perspective," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(1), pages 75-103.
    7. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
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    Cited by:

    1. Dughera, Stefano & Giraudo, Marco, 2020. "Privacy Rights in Online Interactions and Litigation Dynamics: a Social Custom View," Department of Economics and Statistics Cognetti de Martiis. Working Papers 202003, University of Turin.

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    Keywords

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    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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