Behavioral decision theory, Liquidated damages, Judicial decisionmaking
Contracts | Law and Economics | Law and Society | Legal History
Discontent with the apparent tunnel vision of economic analysis of law's rational choice theory, legal scholars recently have turned with enthusiasm to "behavioral decision theory" (BDT) to enrich their understanding of how people make decisions and of the law's effect on human behavior. This article, for the first time, evaluates BDT's potential contribution to legal analysis by focusing on a single, important legal paradox: Despite contract law's freedom of contract paradigm, courts actively and enthusiastically police agreed damages provisions. Although the article finds an important place in legal analysis for this new discipline, the article raises and discusses several obstacles to BDT's effectiveness.
Hillman, Robert A., "The Limits of Behavioral Decision Theory in Legal Analysis: The Case of Liquidated Damages" (2000). Cornell Law Faculty Publications. Paper 548.
Published in: Cornell Law Review, vol. 85, no. 3 (1999-2000).