Behavioral Biases and the Law

Luppi Barbara ()
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Luppi Barbara: Department of Economics and Center for Economic Research (RECENT), University of Modena and Reggio Emilia, John Hopkins University, SAIS, Bologna, Italy

Review of Law & Economics, 2021, vol. 17, issue 2, 453-464

Abstract: Empirical and experimental evidence shows that individuals exhibit behavioral biases in their decision-making processes that depart from the full rationality paradigm. This paper discusses the effectiveness of alternative debiasing strategies, designed to induce socially preferable outcomes. Following Jolls, C. and Sunstein, C.R. (2006). Debiasing through law. J. Leg. Stud. 35: 199–242, this paper examines legal strategies that aim at “debiasing through law”, attempting to reduce or eliminate boundedly rational behavior. Alternatively, policymakers can implement “insulating” legal strategies that separate the outcome from the biased behavior, without attempting to eradicate behavioral biases from the decision-making process. This paper compares these strategies in many areas, such as tort law, consumer safety law, and property law.

Keywords: bounded rationality; optimism bias; debiasing strategy (search for similar items in EconPapers)
JEL-codes: D03 D81 K13 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1515/rle-2021-0065

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