Probability Matching and the Law: A Behavioral Challenge to Law & Economics

Ehud Guttel () and Alon Harel ()

Discussion Paper Series from The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem

Abstract: Contrary to the conventional assumption that individuals maximize payoffs, robust experimental studies show that individuals who face repeated choices involving probabilistic costs and benefits often make sub-optimal decisions by applying the strategy of “probability matching.” The following study, by integrating this literature with the traditional models of law and economics, and through experimental illustration, presents the possible effects of probability matching in the legal context. The paper also explores how probability matching can guide policy making.

Pages: 34 pages
Date: 2004-07
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