TY - JOUR
T1 - Law and preferences
AU - Bar-Gill, Oren
AU - Fershtman, Chaim
N1 - Funding Information:
This paper has greatly benefited from comments and suggestions by Yael Aridor Bar-Ilan, Eric Posner, Adriaan Lanni, three anonymous referees, and conference participants at the 2003 annual meetings of the Canadian and Israeli Law and Economics Associations. We thank Benjamin Roin for excellent research assistance. We gratefully acknowledge the generous financial support provided by the John M. Olin Center for Law, Economics, and Business at Harvard Law School and by the William F. Milton Fund of Harvard University.
PY - 2004/10
Y1 - 2004/10
N2 - Legal rules do more than provide incentives, they change people. When preferences and norms are endogenously determined via a process of imitation and learning, legal rules, by affecting the market outcome, may affect the dynamics of preference formation. Analyzing the effect of different legal rules should therefore go beyond the analysis of the incentives they provide. It should also include an analysis of their effect on the distribution of preferences and norms of behavior. We illustrate this claim by considering a simple market game in which individuals may have preferences that include fairness concerns. We show that different legal rules change not only the pattern of trade in a market game, but also individuals' fairness concerns. That is, different rules may eventually make individuals care more (or less) about a fair outcome. Specifically, our model suggests that enhanced remedies for breach of contract may reduce equilibrium preferences for fairness.
AB - Legal rules do more than provide incentives, they change people. When preferences and norms are endogenously determined via a process of imitation and learning, legal rules, by affecting the market outcome, may affect the dynamics of preference formation. Analyzing the effect of different legal rules should therefore go beyond the analysis of the incentives they provide. It should also include an analysis of their effect on the distribution of preferences and norms of behavior. We illustrate this claim by considering a simple market game in which individuals may have preferences that include fairness concerns. We show that different legal rules change not only the pattern of trade in a market game, but also individuals' fairness concerns. That is, different rules may eventually make individuals care more (or less) about a fair outcome. Specifically, our model suggests that enhanced remedies for breach of contract may reduce equilibrium preferences for fairness.
UR - http://www.scopus.com/inward/record.url?scp=4544262874&partnerID=8YFLogxK
U2 - 10.1093/jleo/ewh036
DO - 10.1093/jleo/ewh036
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AN - SCOPUS:4544262874
SN - 8756-6222
VL - 20
SP - 331
EP - 352
JO - Journal of Law, Economics, and Organization
JF - Journal of Law, Economics, and Organization
IS - 2
ER -