Defamation with Bayesian Audiences

Yonathan Arbel and Murat C. Mungan

The Journal of Legal Studies, 2023, vol. 52, issue 2, 445 - 483

Abstract: How strictly should the law regulate false defamatory statements? We first show that the presence of judicial errors often puts defamation law on a Laffer curve: regulation that is too lax or too strict is inferior to moderate regulation. While moderate regulation is ideal, it is not always attainable because of practical and legal constraints. With these constraints, we consider a Bayesian audience that takes the strictness of defamation law into account when evaluating statements. The optimal standard is then laxer than is prescribed by standard models with naive audiences. These findings underscore the importance of accounting for audience effects in analyzing defamation law.

Date: 2023
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