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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 Research on Collective Goods 2017_11, Max Planck Institute for Research on Collective Goods, revised Jan 2018.
    • Handle: RePEc:mpg:wpaper:2017_11
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    References listed on IDEAS

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    1. Gray, Virginia, 1973. "Innovation in the States: A Diffusion Study," American Political Science Review, Cambridge University Press, vol. 67(4), pages 1174-1185, December.
    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.
    3. Goderis, Benedikt & Versteeg, Mila, 2014. "The diffusion of constitutional rights," International Review of Law and Economics, Elsevier, vol. 39(C), pages 1-19.
    4. Bronwyn H. Hall & Nathan Rosenberg (ed.), 2010. "Handbook of the Economics of Innovation," Handbook of the Economics of Innovation, Elsevier, edition 1, volume 1, number 1.
    5. Claude Diebolt & Tapas Mishra & Mamata Parhi, 2016. "Dynamics of Distribution and Diffusion of New Technology," India Studies in Business and Economics, Springer, number 978-3-319-32744-0, September.
    6. Walker, Jack L., 1969. "The Diffusion of Innovations among the American States," American Political Science Review, Cambridge University Press, vol. 63(3), pages 880-899, September.
    7. Roberta Romano, 2005. "The States as a Laboratory: Legal Innovation and State Competition for Corporate Charters," Yale School of Management Working Papers amz2625, Yale School of Management, revised 01 Jul 2006.
    8. Dunia López-Pintado & Duncan J. Watts, 2008. "Social Influence, Binary Decisions and Collective Dynamics," Rationality and Society, , vol. 20(4), pages 399-443, November.
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    Full references (including those not matched with items on IDEAS)

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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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    More about this item

    Keywords

    Legal Innovation; Diffusion; Imitation; Learning; Class Action;
    All these keywords.

    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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