Learning While Setting Precedents

Ying Chen and Hülya Eraslan

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: A decision maker makes a ruling on a random case in each period. She is uncertain about the correct ruling until conducting a costly investigation. A ruling establishes a precedent, which cannot be violated under binding precedent. We compare the information acquisition incentives, the evolution of standards and the social welfare under nonbinding and binding precedents. Compared to nonbinding precedent, under binding precedent, information acquisition incentives are stronger in earlier periods, but become weaker as more precedents are established. Although erroneous rulings may be perpetuated under binding precedent, welfare can be higher because of the more intensive investigation early on.

Date: 2020-06
New Economics Papers: this item is included in nep-law and nep-mic
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Learning While Setting Precedents (2018)
Working Paper: Learning While Setting Precedents (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:1092

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