This volume of collected essays explores the most relevant developments at the interface of economics and psychology, with special attention to models of irrational behavior, and draws the relevant implications of such models for the design of legal rules and institutions. The application of economic models of irrational behavior to law is especially challenging because specific departures from rational behavior differ markedly from one another. Furthermore, the analytical and deductive instruments of economic theory have to be reshaped to deal with the fragmented and heterogeneous findings of psychological research, lurning towards a more experimental and inductive methodology. This volume brings together scholars who are pioneering in this area, with a presentation of some of the most exciting developments in the field of legal and economic theory. Areas of application include criminal law and sentencing, tort law, contract law, corporate law, and financial markets.
Introduction by Francesco Parisi and Vernon Smith 1
Ch. 1 Departures from rational choice : with and without regret by Robert H. Frank 13
Ch. 2 Is the mind irrational or ecologically rational? by Gerd Gigernzer 37
Ch. 3 Lessons from neuroeconomics for the law by Kevin McCabe and Vernon Smith and Terrence Chorvat 68
Ch. 4 Treating yourself instrumentally : internalization, rationality, and the law by Robert Cooter 95
Ch. 5 Addiction, choice, and irrationality by Ole-Jorgen Skog 111
Ch. 6 Revenge and retaliation by Vincy Fon and Francesco Parisi 141
Ch. 7 What makes trade possible? by Elizabeth Hoffman and Kevin McCabe and Vernon Smith 169
Ch. 8 Satisfaction and learning : an experimental game to measure happiness by Marco Novarese and Salvatore Rizzello 186
Ch. 9 The market for laughter by F. H. Buckley 208
Ch. 10 The jurisprudence of craziness by Stephen J. Morse 225
Ch. 11 On law enforcement with boundedly rational actors by Christine Jolls 268
Ch. 12 The biology of irrationality : crime and the contingency of deterrence by Michael E. O'Neill 287
Ch. 13 Analyzing illicit drug markets when dealers act with limited rationality by Jonathan Caulkins and Robert MacCoun 315
Ch. 14 On the psychology of punishment by Cass R. Sunstein 339
Ch. 15 Some well-aged wines for the "new norms" bottles: implications of social psychology for law and economics by Yuval Feldman and Robert MacCoun 358
Ch. 16 Human fallibility and the forms of law : the case of traffic safety by Thomas S. Ulen 397
Ch. 17 The free radicals of tort by Mark F. Grady 425
Ch. 18 Probability errors : some positive and normative implications for tort and contract law by Eric A. Posner 456
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