Real Options Theory for Law Makers

Marie Obidzinski and Bruno Deffains ()
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Bruno Deffains: BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique

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Abstract: The formulation of legal rules is a challenging issue for lawmakers. Trade-offs are inevitable between providing more guidance by specific rules and enlarging the scope by general rules. Using real options theory we show that the degree of precision should be considered as a degree of flexibility which increases the value of the text. Thus, we derive a normative principle for a draftsman to choose between rules versus standards and to decide when the law should be enacted. In highly innovating environments, delaying the enactment allows lawmakers to obtain more information. Therefore, the lower the degree of precision of the law, the shorter the delay.

Keywords: Degree of precision; Flexibility; Obsolescence; Rulemaking; Flexibilité; Production du droit; Règles; Standards (search for similar items in EconPapers)
Date: 2009-01
Note: View the original document on HAL open archive server: https://hal.science/hal-00447170v1
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Citations: View citations in EconPapers (2)

Published in Recherches Economiques de Louvain - Louvain economic review, 2009, 75 (1), pp.93-117. ⟨10.3917/rel.751.0093⟩

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Journal Article: Real Options Theory for Law Makers (2009)
Working Paper: Real Options Theory for Law Makers (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00447170

DOI: 10.3917/rel.751.0093

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