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Optional LawThe Structure of Legal Entitlements$
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Ian Ayres

Print publication date: 2005

Print ISBN-13: 9780226033464

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226033488.001.0001

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Relaxing Other (Administrative, Informational, and Cognitive) Assumptions

Relaxing Other (Administrative, Informational, and Cognitive) Assumptions

(p.133) Chapter Eight Relaxing Other (Administrative, Informational, and Cognitive) Assumptions
Optional Law

Ian Ayres

University of Chicago Press

Real-world non-consensual takings may impose costs—real social costs—not just of administration (in courts calculating the damages and private parties litigating a dispute), but also in terms of what would broadly be considered switching costs. Each non-consensual transfer of ownership might in some contexts impose costs on one party or the other. Property rules tend to deter non-consensual takings and thus avoid the costs of administering a liability-rule regime. This chapter examines whether alternative administrative, informational, or cognitive assumptions qualify the ultimate implication that liability rules can often be used as a way for the law to delegate allocational authority so as to harness the information of private litigants. It considers three assumptions: the litigants are imperfectly informed about their own valuations, the litigants' probability functions are not common knowledge, and courts systematically misestimate the probability distributions of the litigants' value. It also discusses cognitive bias and wealth effects, along with unintentional takings.

Keywords:   non-consensual takings, transfer of ownership, liability rules, cognitive bias, wealth effects, unintentional takings, litigants, allocational authority, probability distributions, valuations

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