Experimental Economics Seminar for November 4

Events, News | October 31, 2016

Join us for the next ICES Experimental Economics Seminar of the semester, featuring Hülya K. K. Eraslan.

Prof. Eraslan, of Rice University, will discuss her paper (co-authored with Ying Chen) Information Acquisition Under Persuasive Precedent Versus Binding Precedent (Abstract). The talk will take place on Friday, November 4th, from 4:00 to 5:00pm, in room 5183 of the Metropolitan Building, Arlington campus.

Visit the Seminar schedule to access the paper and to learn more about upcoming speakers.

Abstract

We analyze a dynamic model of judicial decision making. A court regulates a set of activities by permitting or banning them. In each period a new case arises and the presiding judge has to decide whether the case should be permitted or banned. The judge is uncertain about the correct ruling until she conducts a costly investigation.

We compare two institutions: persuasive precedent and binding precedent. Under persuasive precedent, the judge is not required to follow previous rulings but can use the information acquired in an investigation made in a previous period. Under binding precedent, however, the judge must follow previous rulings when they apply. In both a three-period model and an infinite-horizon model, we find that the incentive to investigate for the judge is stronger in earlier periods when there are few precedents under binding precedent than under persuasive precedent, but as more precedents are established over time, the incentive to investigate becomes weaker under binding precedent. Even though the judge’s dynamic payoff is always higher under persuasive precedent, social welfare can be higher under binding precedent because of the more intensive investigation conducted early on.

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