Law and Psychology Commons^™

Beyond Economics In Pay For Performance, Tamara C. Belinfanti

Articles & Chapters

This article argues that while much of the intellectual energy has focused on the economics of executive pay, the challenge of executive compensation is as much a challenge of human behavior as it is one of economics. The raison d’etre of pay for performance (PFP) is to motivate executives to make decisions that are in the best interest of their firm and its shareholders. Attention to the relevant individual, situational, cultural, and institutional dynamics (what I term “behavioral dynamics”) that affect how executives are motivated and how they value future rewards is critical for the sustainability of PFP as a …

Happiness And Punishment, Jonathan S. Masur, Christopher Buccafusco, John Bronsteen

John Bronsteen

This article continues our project to apply groundbreaking new literature on the behavioral psychology of human happiness to some of the most deeply analyzed questions in law. Here we explain that the new psychological understandings of happiness interact in startling ways with the leading theories of criminal punishment. Punishment theorists, both retributivist and utilitarian, have failed to account for human beings' ability to adapt to changed circumstances, including fines and (surprisingly) imprisonment. At the same time, these theorists have largely ignored the severe hedonic losses brought about by the post-prison social and economic deprivations (unemployment, divorce, and disease) caused by …

Mental Budget: Inefficient Clauses Or Consumer Choices?, Enrico Baffi

enrico baffi

In this paper I aim to demonstrate that due the phenomenon of consumer mental accounting, it's not possible to consider money as fungible. Consumers decide to spend a certain amount of money for a kind of good and they are not willing to take some extra money from the jars that contain the money to spend for other goods. But consumers seem to have a sort of reserve which encompass efforts, time, and the possibility to bear risk that they use to save money and obtain a lower price for a good. To explain, a good can be delivered at …

Efficient Penalty Clauses With Debiasing: Lessons From Behavioral Law And Economics, Enrico Baffi

enrico baffi

This paper builds upon the findings of cognitive psychology to revisit the prescriptive solutions proposed in the legal literature with respect to efficient penalty clauses. While refraining from generalizations regarding human behaviour, generalizations that might lead to positions quite removed from reality and in part ideological, as was the case with rational choice theory, the paper instead seeks to distinguish one situation from another in order to identify the existence of decision debiasing mechanisms capable of justifying - in the case of the set of rules in question - hypotheses in which lesser control over the penalty clause would be …

Mental Budget And Inefficient Clauses: A Lesson From Behavioral Law Nand Economics, Enrico Baffi

enrico baffi

This paper is an attempt to highlight how clauses, which are traditionally considered to be inefficient, may actually be desired by consumers. This anomaly originates in the fact that each individual builds a mental budget by dividing the money he has among the needs he intends to satisfy. According to consumers’ reasoning, money is not fungible, in the sense that amounts cannot be transferred from one expenditure to another. Consumers who behave in this way may sometimes find that they have depleted the amount they budgeted for an item while wanting to buy more of it. Since additional time, efforts …

From Stick To Carrot: An Endowment Account Of Expressive Law, David E. Depianto

David E. DePianto

This paper extends the literature on expressive law by developing a model of compliance rooted in the endowment effect. The central premise of the model is that compliance with legal rules, while costly from an ex ante perspective, may also endow individuals with a stream of benefits whose ex post value will increase. Examples of compliance-related benefits would include reductions in risk to one’s own health and safety, enhanced reputation (as a law-abiding individual), and even tangible goods. Under this novel account, once an individual has complied with a law, received some associated benefits, and grown attached to such benefits …

Transferring Trust: Reciprocity Norms And Assignment Of Contract, Tess Wilkinson-Ryan

All Faculty Scholarship

This paper presents four experiments testing the prediction that assignment of contract rights erodes the moral obligation to perform. The first three studies used an experimental laboratory game designed to model contractual exchange. Players in the games were less selfish with a previously-generous partner than with third-party player who had purchased the right to the original partner’s expected return. The fourth study used a web-based questionnaire, and found that subjects reported that they would require less financial incentive to breach an assigned contract than a contract held by the original promisee. The results of these four experiments provide support for …

The Law And Economics Of Fluctuating Criminal Tendencies And Incapacitation, Murat C. Mungan

Faculty Scholarship

Economic analyses of criminal law are frequently and heavily criticized for being unable to explain many criminal law rules and doctrines that people find intuitively just. Existing economic models cannot properly explain, for instance, why criminal law distinguishes between (i) repeat offenders and first-time offenders, (ii) murder and voluntary manslaughter, and (iii) remorseful and non-remorseful offenders.

In this Article, I propose a new and richer economic theory of crime that captures the rationales behind these practices, and potentially behind many other important criminal law principles and doctrines. Unlike an overwhelming majority of previous economic analyses, my theory accounts not only …