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Behavioral economics

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Institution
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Full-Text Articles in Law

Race, Dignity, And Commerce, Lu-In Wang Jan 2021

Race, Dignity, And Commerce, Lu-In Wang

Articles

This Essay was written at the invitation of the Journal of Law and Commerce to contribute a piece on racism and commerce—an invitation that was welcome and well timed. It arrived as renewed attention was focused on racialized policing following the killing of George Floyd and in the midst of the worsening pandemic that highlighted unrelenting racial, social, and economic inequities in our society.

The connections between racism and commerce are potentially numerous, but the relationship between discriminatory policing and commerce might not be apparent. This Essay links them through the concept of dignity. Legal scholar John Felipe Acevedo ...


Price Gouging In A Pandemic, Christopher Buccafusco, Daniel Jacob Hemel, Eric L. Talley Jan 2021

Price Gouging In A Pandemic, Christopher Buccafusco, Daniel Jacob Hemel, Eric L. Talley

Faculty Scholarship

The ongoing Covid-19 pandemic has led to acute supply shortages across the country as well as concerns over price increases amid surging demand. In the process, it has reawakened a debate about whether and how to regulate “price gouging.” Animating this controversy is a longstanding conflict between laissez-faire economics (which champions price fluctuations as a means to allocate scarce goods) and perceived norms of consumer fairness (which are thought to cut strongly against sharp price hikes amid shortages). This article provides a new, empirically grounded perspective on the price gouging debate that challenges several aspects of conventional wisdom. We report ...


Affording Obamacare, Isaac Buck Feb 2020

Affording Obamacare, Isaac Buck

UTK Law Faculty Publications

As it approaches its tenth birthday, the Patient Protection and Affordable Care Act (ACA) is devolving. Intended to solve problems that had vexed American health care for generations, the ACA built a comprehensive structure by providing more Americans with accessible health insurance, reordering the private insurance market, expanding and reconfiguring Medicaid, and installing rational incentives into America’s health care enterprise. Without question, it was the most important piece of health care legislation since the mid-1960s, and it brought about positive change for millions of Americans.

However, over its short lifespan, the ACA has faced persistent practical, popular, and policy-based ...


Dignity Transacted, Lu-In Wang, Zachary W. Brewster Jan 2019

Dignity Transacted, Lu-In Wang, Zachary W. Brewster

Articles

In interactive customer service encounters, the dignity of the parties becomes the currency of a commercial transaction. Service firms that profit from customer satisfaction place great emphasis on emotional labor, the work that service providers do to make customers feel cared for and esteemed. But performing emotional labor can deny dignity to workers, by highlighting their subservience and requiring them to suppress their own emotions in an effort to elevate the status and experiences of their customers. Paradoxically, the burden of performing emotional labor may also impose transactional costs on some customers by facilitating discrimination in service delivery. Drawing on ...


Law And Economics Versus Economic Analysis Of Law, Keith Hylton Mar 2018

Law And Economics Versus Economic Analysis Of Law, Keith Hylton

Faculty Scholarship

I agree with Calabresi’s general distinction between Economic Analysis of Law and Law and Economics. However, these broad categories may obscure important differences between types of law and economics scholarship. I would distinguish positive economic analysis from normative economic analysis, and positivist legal analysis from nonpositivist analysis. The four categories generated by these distinctions provide a more fine-grained map of the styles of reasoning in law and economics, and has implications for the future of law and economics.


Economic Individualism And Preference Formation, Andrzej Rapaczynski Jan 2018

Economic Individualism And Preference Formation, Andrzej Rapaczynski

Faculty Scholarship

This note examines some issues involved in an attempt to go beyond the assumption, long-made by most economists, that people’s preferences are simply to be treated as “given” and that the principle of consumer sovereignty entails a refusal to consider some (or some people’s) revealed preferences as more authoritative than others. The most important break with that assumption has been the development of behavioral economics, which shows that people may not always know what they really want, and that economists have to develop a more critical approach, distinguishing people’s true preferences from those that are merely apparent ...


Facilitating Competition By Remedial Regulation, Kristelia A. García Jan 2016

Facilitating Competition By Remedial Regulation, Kristelia A. García

Articles

In music licensing, powerful music publishers have begun—for the first time ever— to withdraw their digital copyrights from the collectives that license those rights, in order to negotiate considerably higher rates in private deals. At the beginning of the year, two of these publishers commanded a private royalty rate nearly twice that of the going collective rate. This result could be seen as a coup for the free market: Constrained by consent decrees and conflicting interests, collectives are simply not able to establish and enforce a true market rate in the new, digital age. This could also be seen ...


From Promise To Form: How Contracting Online Changes Consumers, David A. Hoffman Jan 2016

From Promise To Form: How Contracting Online Changes Consumers, David A. Hoffman

Faculty Scholarship at Penn Law

I hypothesize that different experiences with online contracting have led some consumers to see contracts—both online and offline—in distinctive ways. Experimenting on a large, nationally representative sample, this paper provides evidence of age-based and experience-based differences in views of consumer contract formation and breach. I show that younger subjects who have entered into more online contracts are likelier than older ones to think that contracts can be formed online, that digital contracts are legitimate while oral contracts are not, and that contract law is unforgiving of breach.

I argue that such individual differences in views of contract formation ...


The Corporation As Courthouse, Rory Van Loo Jan 2016

The Corporation As Courthouse, Rory Van Loo

Faculty Scholarship

Despite the considerable attention paid to mandatory arbitration, few consumer disputes ever reach arbitration. By contrast, institutions such as Apple’s customer service department handle hundreds of millions of disputes annually. This Article argues that understanding businesses’ internal dispute processes is crucial to diagnosing consumers’ procedural needs. Moreover, businesses’ internal processes interact with a larger system of private actors. These actors include ratings websites that mete out reputational sanctions. The system also includes other corporations linked to the transaction, such as when American Express adjudicates a contested sale between a shopper and Home Depot. This vast private order offers promise ...


The Psychology Of Patent Protection, Stephanie Plamondon Bair Dec 2015

The Psychology Of Patent Protection, Stephanie Plamondon Bair

Faculty Scholarship

This Article offers the first comprehensive assessment of the major justifications for our patent system using a behavioral psychology framework. Applying insights from the behavioral literature that I argue more accurately account for the realities of human action than previous analytical tools, I critically evaluate each of the major justifications for patents — incentive theory, disclosure theory, prospect theory, commercialization theory, patent racing theory, and non-utilitarian theories. I ask whether our current patent system is an effective regime for meeting the stated goals of these accounts. When the answer to this question is no, I again turn to the behavioral literature ...


Introducing The 'New Handshake' To Expand Remedies And Revive Responsibility In Ecommerce, Amy J. Schmitz Jul 2015

Introducing The 'New Handshake' To Expand Remedies And Revive Responsibility In Ecommerce, Amy J. Schmitz

Faculty Publications

There was a time when individuals would meet in person to make purchases and do deals. They would discuss the terms, assess the trustworthiness and character of their contracting partners, and conclude the deal with a handshake. The handshake helped ensure the enforcement of the deal without need for the rule of law or legal power. That handshake was one’s bond — it was a personal trust mark. With the emergence of eCommerce, however, that handshake has nearly disappeared along with the sense of responsibility it inspired. Accordingly, this article discusses how this has impacted consumers’ access to remedies regarding ...


Information Overload, Multi-Tasking, And The Socially Networked Jury: Why Prosecutors Should Approach The Media Gingerly, Andrew E. Taslitz Jun 2015

Information Overload, Multi-Tasking, And The Socially Networked Jury: Why Prosecutors Should Approach The Media Gingerly, Andrew E. Taslitz

School of Law Faculty Publications

The rise of computer technology, the internet, rapid news dissemination, multi-tasking, and social networking have wrought changes in human psychology that alter how we process news media. More specifically, news coverage of high-profile trials necessarily focuses on emotionally-overwrought, attention-grabbing information disseminated to a public having little ability to process that information critically. The public’s capacity for empathy is likewise reduced, making it harder for trial processes to overcome the unfair prejudice created by the high-profile trial. Market forces magnify these changes. Free speech concerns limit the ability of the law to alter media coverage directly, and the tools available ...


A Psychological Account Of Consent To Fine Print, Tess Wilkinson-Ryan May 2014

A Psychological Account Of Consent To Fine Print, Tess Wilkinson-Ryan

Faculty Scholarship at Penn Law

The moral and social norms that bear on contracts of adhesion suggest a deep ambivalence. Contracts are perceived as serious moral obligations, and yet they must be taken lightly or everyday commerce would be impossible. Most people see consent to boilerplate as less meaningful than consent to negotiated terms, but they nonetheless would hold consumers strictly liable for both. This Essay aims to unpack the beliefs, preferences, assumptions, and biases that constitute our assessments of assent to boilerplate. Research suggests that misgivings about procedural defects in consumer contracting weigh heavily on judgments of contract formation, but play almost no role ...


Demand For Breach, Tess Wilkinson-Ryan Apr 2014

Demand For Breach, Tess Wilkinson-Ryan

Faculty Scholarship at Penn Law

These studies elicit behavioral evidence for how people weigh monetary and non-monetary incentives in efficient breach. Study 1 is an experimental game designed to capture the salient features of the efficient breach decision. Subjects in a behavioral lab were offered different amounts of money to break the deal they had made with a partner. 18.6% of participants indicated willingness to break a deal for any amount of profit, 27.9% were unwilling to breach for the highest payout, and the remaining subjects identified a break-point in between. Study 2 is an online questionnaire asking subjects to take the perspectives ...


Females On The Fringe: Considering Gender In Payday Lending Policy, Amy J. Schmitz Jan 2014

Females On The Fringe: Considering Gender In Payday Lending Policy, Amy J. Schmitz

Faculty Publications

Payday lending may provide a much-needed safety net for some consumers in need of quick cash for emergencies. However, data suggest that most payday loan borrowers become repeat users caught in a cycle of high-cost debt. Furthermore, empirical evidence indicates consistent overrepresentation of women, including many single mothers, among payday loan borrowers. This takes a toll not only on these women and their families, but also on society as a whole. Indeed, context matters in payday lending debates. It is thus time to think creatively and consider contextualized programs that aim to increase women’s and all consumers’ safe borrowing ...


Facilitating Incomplete Contracts, Wendy Epstein Jan 2014

Facilitating Incomplete Contracts, Wendy Epstein

College of Law Faculty

Contract law abhors incompleteness. Although no contract can be entirely complete, the idea of a purposefully incomplete or underspecified contract is antithetical to lawyers’ ideals of certainty for the parties and for the law. Indeed, contract law is designed to incentivize parties to specifically articulate their intentions. Yet there is a growing body of interdisciplinary work in economics and cognitive psychology demonstrating that highly specified contracts tend to stifle intrinsic motivation and innovation, whereas less-specified contracts — particularly in public-private contracting, IP, and contracting for innovation — can induce higher effort levels and a more cooperative principal-agent relationship than the traditional approach ...


"Nudging" Better Lawyer Behavior: Using Default Rules And Incentives To Change Behavior In Law Firms, Nancy B. Rapoport Jan 2014

"Nudging" Better Lawyer Behavior: Using Default Rules And Incentives To Change Behavior In Law Firms, Nancy B. Rapoport

Scholarly Works

This article examines how incentives in law firms can affect lawyer behavior and suggests some possible changes to incentive structures and default rules that might improve the ethical behavior of lawyers.

In the changing landscape of law practice — where law firm profits are threatened by such changes as increased pressure from clients to economize and the concomitant opportunities for clients to shop around for the most efficient lawyers — are there ways to change how things are done in law firms so that firms can provide more efficient and ethical service? This article suggests that an understanding of cognitive biases and ...


At The Tipping Point: Race And Gender Discrimination In A Common Economic Transaction, Lu-In Wang Jan 2014

At The Tipping Point: Race And Gender Discrimination In A Common Economic Transaction, Lu-In Wang

Articles

This Article examines the ubiquitous, multibillion dollar practice of tipping as a vehicle for race and gender discrimination by both customers and servers and as a case study of the role that organizations play in producing and promoting unequal treatment. The unique structure of tipped service encounters provides plenty of opportunities and incentives for the two parties to discriminate against one another. Neither customers nor servers are likely to find legal redress for the kinds of discrimination that are most likely to occur in tipped service transactions, however, because many of the same features of the transaction that promote discrimination ...


Penalty Default Licenses: A Case For Uncertainty, Kristelia A. García Jan 2014

Penalty Default Licenses: A Case For Uncertainty, Kristelia A. García

Articles

Research on the statutory license for certain types of copyright-protected content has revealed an unlikely symbiosis between uncertainty and efficiency. Contrary to received wisdom, which tells us that in order to increase efficiency, we must increase stability, this Article suggests that uncertainty can actually be used to increase efficiency in the marketplace. In the music industry, the battle over terrestrial performance rights--that is, the right of a copyright holder to collect royalties for plays of a sound recording on terrestrial radio--has raged for decades. In June 2012, in a deal that circumvented the statutory license for sound recordings for the ...


Are Individuals Fickle-Minded?, Mathew D. Mccubbins, Mark Turner Jan 2014

Are Individuals Fickle-Minded?, Mathew D. Mccubbins, Mark Turner

Faculty Scholarship

Game theory has been used to model large-scale social events — such as constitutional law, democratic stability, standard setting, gender roles, social movements, communication, markets, the selection of officials by means of elections, coalition formation, resource allocation, distribution of goods, and war — as the aggregate result of individual choices in interdependent decision-making. Game theory in this way assumes methodological individualism. The widespread observation that game theory predictions do not in general match observation has led to many attempts to repair game theory by creating behavioral game theory, which adds corrective terms to the game theoretic predictions in the hope of making ...


The Burden Of Deciding For Yourself: The Disutility Caused By Out-Of-Pocket Healthcare Spending, Christopher Robertson, David Yokum Jan 2014

The Burden Of Deciding For Yourself: The Disutility Caused By Out-Of-Pocket Healthcare Spending, Christopher Robertson, David Yokum

Faculty Scholarship

As part of a larger "consumer-directed healthcare movement," cost-sharing mechanisms, such as copays and deductibles, cause patients to pay out of pocket for a portion of the costs of the healthcare they consume. Cost sharing is intended to reduce costs by changing consumption behavior, and it has been shown to be an effective though incomplete solution to the problem of unsustainable cost growth. It is controversial nonetheless. This Essay distinguishes three different normative problems with cost sharing (including underinsurance, deterrence of high-value care, and a tax on sickness), which can all be fixed through more precision in the design of ...


Rethinking Summary Judgment Empirics: The Life Of The Parties, Jonah B. Gelbach Jan 2014

Rethinking Summary Judgment Empirics: The Life Of The Parties, Jonah B. Gelbach

Faculty Scholarship at Penn Law

No abstract provided.


Vertical Boilerplate, James Gibson May 2013

Vertical Boilerplate, James Gibson

Law Faculty Publications

Despite what we learn in law school about the “meeting of the minds,” most contracts are merely boilerplate—take-it-or-leave-it propositions. Negotiation is nonexistent; we rely on our collective market power as consumers to regulate contracts’ content. But boilerplate imposes certain information costs because it often arrives late in the transaction and is hard to understand. If those costs get too high, then the market mechanism fails. So how high are boilerplate’s information costs? A few studies have attempted to measure them, but they all use a “horizontal” approach—i.e., they sample a single stratum of boilerplate and assume ...


Sex Matters: Considering Gender In Consumer Contracts, Amy J. Schmitz Apr 2013

Sex Matters: Considering Gender In Consumer Contracts, Amy J. Schmitz

Faculty Publications

We hear about the so-called “War on Women” and persisting salary gaps between men and women in the popular media, but contracts scholars and policymakers rarely discuss gender. Instead, dominant voices in the contracts field often reflect classical and economics-driven theories built on assumptions of gender neutral and economically rational actors. Furthermore, many mistakenly assume that market competition and antidiscrimination legislation address any improper biases in contracting. This Article therefore aims to shed light on gender’s importance by distilling data from my own e-survey of Colorado consumers along with others’ research regarding gender differences in contract outcomes, interests and ...


What's A Name Worth?: Experimental Tests Of The Value Of Attribution In Intellectual Property, Christopher Jon Sprigman, Christopher Buccafusco, Zachary Burns Jan 2013

What's A Name Worth?: Experimental Tests Of The Value Of Attribution In Intellectual Property, Christopher Jon Sprigman, Christopher Buccafusco, Zachary Burns

Articles

Despite considerable research suggesting that creators value attribution – i.e., being named as the creator of a work – U.S. intellectual property (IP) law does not provide a right to attribution to the vast majority of creators. On the other side of the Atlantic, however, many European countries give creators, at least in their copyright laws, much stronger rights to attribution. At first blush it may seem that the U.S. has gotten it wrong, and the Europeans have made a better policy choice in providing to creators a right that they value. But for reasons we will explain in ...


Behavioral Economics And Investor Protection: Reasonable Investors, Efficient Markets, Barbara Black Jan 2013

Behavioral Economics And Investor Protection: Reasonable Investors, Efficient Markets, Barbara Black

Faculty Articles and Other Publications

The judicial view of a “reasonable investor” plays an important role in federal securities regulation, and courts express great confidence in the reasonable investor’s cognitive abilities. Behavioral economists, by contrast, do not observe real people investing in today’s markets behaving as the reasonable investors that federal securities law expects them to be. Similarly, the efficient market hypothesis (EMH) has exerted a powerful influence in securities regulation, although empirical evidence calls into question some of the basic assumptions underlying EMH. Unfortunately, to date, courts have only acknowledged the discrepancy between legal theory and behavioral economics in one situation, class ...


Copyright Freeconomics, John M. Newman Jan 2013

Copyright Freeconomics, John M. Newman

Articles

Innovation has wreaked creative destruction on traditional content platforms. During the decade following Napster's rise and fall, industry organizations launched litigation campaigns to combat the dramatic downward pricing pressure created by the advent of zero-price, copyright-infringing content. These campaigns attracted a torrent of debate among scholars and stakeholders regarding the proper scope and role of copyright law-but this ongoing debate has missed the forest for the trees. Industry organizations have abandoned litigation efforts, and many copyright owners now compete directly with infringing products by offering legitimate content at a price of $0.00.

This sea change has ushered in ...


Can We Build Behavioral Game Theory?, Gale M. Lucas, Mathew D. Mccubbins, Mark Turner Jan 2013

Can We Build Behavioral Game Theory?, Gale M. Lucas, Mathew D. Mccubbins, Mark Turner

Faculty Scholarship

The way economists and other social scientists model how people make interdependent decisions is through the theory of games. Psychologists and behavioral economists, however, have established many deviations from the predictions of game theory. In response to these findings, a broad movement has arisen to salvage the core of game theory. Extant models of interdependent decision-making try to improve their explanatory domain by adding some corrective terms or limits. We will make the argument that this approach is misguided. For this approach to work, the deviations would have to be consistent. Drawing in part on our experimental results, we will ...


Carrots, Sticks, And Salience, Brian Galle Jan 2013

Carrots, Sticks, And Salience, Brian Galle

Georgetown Law Faculty Publications and Other Works

This Article considers the second-best design of Pigouvian taxes and subsidies in the presence of agents who are imperfectly aware of the instrument. Until very recently, the price instrument literature has assumed perfect rationality, and even the handful of prior attempts to account for “hidden” prices focus mainly on the income tax. I extend these efforts in several directions. First, I show that the best available instrument for correcting negative externalities is often one whose price is partially adjusted upwards -- or, in the case of subsidies, downwards -- to counter-act the neglect of irrational actors. In addition, I argue that the ...


Against Endowment Theory: Experimental Economics And Legal Scholarship, Greg Klass, Kathryn Zeiler Jan 2013

Against Endowment Theory: Experimental Economics And Legal Scholarship, Greg Klass, Kathryn Zeiler

Faculty Scholarship

Endowment theory holds the mere ownership of a thing causes people to assign greater value to it than they otherwise would. The theory entered legal scholarship in the early 1990s and quickly eclipsed other accounts of how ownership affects valuation. Today, appeals to a generic “endowment effect” can be found throughout the legal literature. More recent experimental results, however, suggest that the empirical evidence for endowment theory is weak at best. When the procedures used in laboratory experiments are altered to rule out alternative explanations, the “endowment effect” disappears. This and other recent evidence suggest that mere ownership does not ...