scholarly journals Law & Economics as a Theory of Decision Making in Legal Contexts – Decision Theoretical Foundations, Their Misinterpretations and Excessive Claims of Economic Analysis of Law

2012 ◽  
pp. 34-50
Author(s):  
Magdalena Małecka
Keyword(s):  
Decision Making ◽  
Economic Analysis ◽  
Decision Theory ◽  
Prospect Theory ◽  
Expected Utility ◽  
Economic Analysis Of Law ◽  
Legal Norms ◽  
Legal Contexts ◽  
Theoretical Foundations ◽  
The Way

The article treats law & economics as a proposal of a theory of decision making in legal settings. It is emphasized that the distinction between two approaches in economic analysis of law: the neoclassical and the behavioral one, is made with reference to two different theories of decision making applied in the realm of each approach. The neoclassical approach is based on the theory of expected utility, whereas the behavioral one – on prospect theory. According to the scholars on both sides, application of decision theory might be helpful in influencing behavior by legal norms in a more sophisticated way. The claim of the article is that law & economics scholars misinterpret the assumptions and propositions of the theories and/or formulate excessive claims, if they argue that decision theoretical findings provide knowledge about the way in which people’s decisions are influenced by law.

scholarly journals The dynamics of change in decision making under risk

Psihologija ◽  
2007 ◽  
Vol 40 (1) ◽  
pp. 147-164 ◽  
Author(s):  
Aleksandar Milicevic ◽  
Dubravka Pavlicic ◽  
Aleksandar Kostic
Keyword(s):  
Decision Making ◽  
Prospect Theory ◽  
Expected Utility ◽  
Empirical Evaluation ◽  
Expected Value ◽  
Decision Making Under Risk ◽  
Outcome Probability ◽  
Made In ◽  
The Way

The goal of this study was to investigate the dynamics of decision making under risk. In three experiments this dynamics have been explored with respect to probability of outcome and with respect to frame, i.e. the way the outcomes of the alternatives have been specified. The process of decision making was explored within a framework of expected utility and Prospect theory. The outcomes of alternatives as well as their probabilities were quantitatively specified (so that the expected value of a risk alternative was equal to the value of a non-risk alternative). The results of experiments indicate that the attitude towards risk (risk-proneness vs. risk-averseness) depends on the outcome probability and the way the outcomes were specified (i.e. positive/negative frame). It was also demonstrated that content strongly affects the choices made in decision making. This outcome is somewhat unexpected and requires additional empirical evaluation.

scholarly journals Cumulative Prospect Theory Version with Fuzzy Values of Outcome Estimates

Risks ◽  
2021 ◽  
Vol 9 (4) ◽  
pp. 72
Author(s):  
Oleg Uzhga-Rebrov ◽  
Peter Grabusts
Keyword(s):  
Prospect Theory ◽  
Expected Utility ◽  
Utility Theory ◽  
Expected Utility Theory ◽  
Cumulative Prospect Theory ◽  
Development History ◽  
Decisions Under Risk ◽  
History Of ◽  
Main Factors ◽  
Theoretical Foundations

Choosing solutions under risk and uncertainty requires the consideration of several factors. One of the main factors in choosing a solution is modeling the decision maker’s attitude to risk. The expected utility theory was the first approach that allowed to correctly model various nuances of the attitude to risk. Further research in this area has led to the emergence of even more effective approaches to solving this problem. Currently, the most developed theory of choice with respect to decisions under risk conditions is the cumulative prospect theory. This paper presents the development history of various extensions of the original expected utility theory, and the analysis of the main properties of the cumulative prospect theory. The main result of this work is a fuzzy version of the prospect theory, which allows handling fuzzy values of the decisions (prospects). The paper presents the theoretical foundations of the proposed version, an illustrative practical example, and conclusions based on the results obtained.

Behavioral Economics and Court Decision-Making

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Doron Teichman ◽  
Eyal Zamir
Keyword(s):  
Decision Making ◽  
Economic Analysis ◽  
Behavioral Economics ◽  
Court Decision ◽  
Social Optimum ◽  
Court Decisions ◽  
Heuristics And Biases ◽  
Court System ◽  
Economic Analysis Of Law ◽  
The Social

Abstract The economic analysis of law assumes that court decisions are key to incentivizing people and maximizing social welfare. This article reviews the behavioral literature on court decision making, and highlights numerous heuristics and biases that impact judges and jurors and cause them to make decisions that diverge from the social optimum. In light of this review, the article analyzes some of the institutional features of the court system that may help minimize the costs of biased decisions in the courts.

BETTING MARKET: Rank Dependent Expected Utility

2013 ◽  
Vol 1 (2) ◽  
pp. 147-163
Author(s):  
Loreto Llorente
Keyword(s):  
Decision Theory ◽  
Expected Utility ◽  
Utility Maximization ◽  
Betting Market ◽  
Expected Utility Maximization ◽  
Classical Decision ◽  
Rank Dependent Expected Utility ◽  
The Way

In Pelota matches, games with two mutually exclusive and exhaustive outcomes, bets on the winner are made through a middleman who receives 16% of the finally paid amount. The classical decision theory of expected utility maximization can not explain this market assuming bettors are identical. Llorente and Aizpurua (2007) explain the existence of bets in the market under Quiggin’s rank dependent expected utility (RDEU) model. They find that bettors have to be optimistic in order to explain the existence of a bet. Analyzing the way odds are fixed in the market Llorente (2006) finds that assuming equal return on bets there are inefficiencies in the market. In this paper we show that, given an assumption that bettors are rank dependent expected utility maximizers, these inefficiencies tend to disappear.

scholarly journals Analisa Ekonomi Atas Hukum Pidana terhadap Penanggulangan Tindak Pidana Korupsi

Wajah Hukum ◽  
2019 ◽  
Vol 3 (1) ◽  
pp. 60
Author(s):  
Dedy Syaputra
Keyword(s):  
Economic Analysis ◽  
Social Welfare ◽  
White Collar Crime ◽  
White Collar ◽  
Economic Analysis Of Law ◽  
Legal Problem ◽  
Legal Norms ◽  
Economic Problems ◽  
Welfare Measures

Life in the community will not be far from economic problems, so even economic problems will become a legal problem if the aspect of fulfilling daily needs suffers. Then criminal problems will arise such as theft, and others. Even on a larger scale can the white collar crime arise. The purpose of this study aims to analyze economics of law, or commonly known as "Economic Analysis of Law" will test systemically how people act against legal incentives and analyze them according to social welfare measures. The method used is a normative juridical approach, which is to find the legal norms and norms for dealing with corruption

Deontological Decision Theory and the Grounds of Subjective Permissibility

2019 ◽  
pp. 204-222
Author(s):  
Seth Lazar
Keyword(s):  
Decision Making ◽  
Decision Theory ◽  
Expected Utility ◽  
Imperfect Information ◽  
Perfect Information ◽  
Risk And Uncertainty

If we had perfect information, then we could say, for any given objectively permissible act, what makes it objectively permissible. But when we have imperfect information, when we must decide under risk and uncertainty, what then makes an act subjectively permissible or impermissible? There are two salient possibilities. The first is the “verdicts” approach. It grounds judgments of subjective permissibility in probabilistically discounted judgments of objective permissibility. The principle “minimize expected objective wrongness” takes this approach. The second is the “reasons” approach. It grounds subjective permissibility in probabilistically discounted objective reasons. “Maximize expected utility” is one example. Chapter 10 considers whether the verdicts approach or the reasons approach to grounding judgments of subjective permissibility is better suited for deontological decision-making with imperfect information. Perhaps surprisingly, the reasons approach comes out on top.

scholarly journals Deal or No Deal? Decision Making under Risk in a Large-Payoff Game Show

2008 ◽  
Vol 98 (1) ◽  
pp. 38-71 ◽  
Author(s):  
Thierry Post ◽  
Martijn J van den Assem ◽  
Guido Baltussen ◽  
Richard H Thaler
Keyword(s):  
Decision Making ◽  
Risk Aversion ◽  
Prospect Theory ◽  
Expected Utility ◽  
Utility Theory ◽  
Path Dependence ◽  
Expected Utility Theory ◽  
Decision Making Under Risk ◽  
Game Show ◽  
Dependent Choice

We examine the risky choices of contestants in the popular TV game show “Deal or No Deal” and related classroom experiments. Contrary to the traditional view of expected utility theory, the choices can be explained in large part by previous outcomes experienced during the game. Risk aversion decreases after earlier expectations have been shattered by unfavorable outcomes or surpassed by favorable outcomes. Our results point to reference-dependent choice theories such as prospect theory, and suggest that path-dependence is relevant, even when the choice problems are simple and well defined, and when large real monetary amounts are at stake. (JEL D81)

Probability Dominance

2020 ◽  
Vol 102 (5) ◽  
pp. 1006-1020
Author(s):  
Enrico Diecidue ◽  
Haim Levy ◽  
Moshe Levy
Keyword(s):  
Decision Making ◽  
Prospect Theory ◽  
Expected Utility ◽  
Cumulative Prospect Theory ◽  
Economic Consequences ◽  
Regret Theory ◽  
Decisions Under Risk ◽  
Set Up ◽  
Winner Take All ◽  
Probability Dominance

The most commonly employed paradigms for decision making under risk are expected utility, prospect theory, and regret theory. We examine the simple heuristic of maximizing the probability of being ahead, which in some natural economic situations may be in contradiction to all three of the above fundamental paradigms. We test whether this heuristic, which we call probability dominance (PD), affects decisions under risk. We set up head-to-head situations where all preferences of a given class (expected utility, original or cumulative prospect theory, or regret theory) favor one alternative yet PD favors the other. Our experiments reveal that 49% of subjects' choices are aligned with PD in contradiction to any form of expected utility or prospect theory maximization; 73% are aligned with PD as opposed to preferences under risk aversion and under original and cumulative prospect theory preferences; and 68% to 76% are aligned with PD contradicting preferences under regret theory. We conclude that probability dominance substantially affects choices and should therefore be incorporated into decision-making models. We show that PD has significant economic consequences. The PD heuristic may have evolved through situations of winner-take-all competition.

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