Game Theory and the Law

Game Theory and the Law promises to be the definitive guide to the field. It provides a highly sophisticated yet exceptionally clear explanation of game theory, with a host of applications to legal issues. The authors have not only synthesized the existing scholarship, but also created the foundation for the next generation of research in law and economics."

Preface

xi

Introduction: Understanding Strategic Behavior

1

(3)

Bibliographic Notes

4

(2)

1 Simultaneous Decisionmaking and the Normal Form Game

6

(44)

The Normal Form Game

6

(8)

Using Different Games to Compare Legal Regimes

14

(5)

The Nash Equilibrium

19

(5)

Civil Liability, Accident Law, and Strategic Behavior

24

(4)

Legal Rules and the Idea of Strict Dominance

28

(3)

Collective Action Problems and the Two-by-Two Game

31

(4)

The Problem of Multiple Nash Equilibria

35

(11)

Summary

46

(1)

Bibliographic Notes

46

(4)

2 Dynamic Interaction and the Extensive Form Game

50

(29)

The Extensive Form Game and Backwards Induction

50

(7)

A Dynamic Model of Preemption and Strategic Commitment

57

(6)

Subgame Perfection

63

(12)

Summary

75

(2)

Bibliographic Notes

77

(2)

3 Information Revelation, Disclosure Laws, and Renegotiation

79

(43)

Incorporating Beliefs into the Solution Concept

80

(3)

The Perfect Bayesian Equilibrium Solution Concept

83

(6)

Verifiable Information, Voluntary Disclosure, and the Unraveling Result

89

(6)

Disclosure Laws and the Limits of Unraveling

95

(14)

Observable Information, Norms, and the Problem of Renegotiation

109

(3)

Optimal Incentives and the Need for Renegotiation

112

(4)

Limiting the Ability of Parties to Renegotiate

116

(2)

Summary

118

(1)

Bibliographic Notes

119

(3)

4 Signaling, Screening, and Nonverifiable Information

122

(37)

Signaling and Screening

122

(3)

Modeling Nonverifiable Information

125

(17)

Signals and the Effects of Legal Rules

142

(5)

Information Revelation and Contract Default Rules

147

(6)

Screening and the Role of Legal Rules

153

(3)

Summary

156

(1)

Bibliographic Notes

157

(2)

5 Reputation and Repeated Games

159

(29)

Backwards Induction and Its Limits

159

(6)

Infinitely Repeated Games, Tacit Collusion, and Folk Theorems

165

(13)

Reputation, Predation, and Cooperation

178

(8)

Summary

186

(1)

Bibliographic Notes

186

(2)

6 Collective Action, Embedded Games, and the Limits of Simple Models

188

(31)

Collective Action and the Role of Law

189

(2)

Embedded Games

191

(4)

Understanding the Structure of Large Games

195

(7)

Collective Action and Private Information

202

(6)

Collective Action Problems in Sequential Decisionmaking

208

(5)

Herd Behavior

213

(4)

Summary

217

(1)

Bibliographic Notes

217

(2)

7 Noncooperative Bargaining

219

(25)

Modeling the Division of Gains from Trade

219

(5)

Legal Rules as Exit Options

224

(8)

Bargaining and Corporate Reorganizations

232

(5)

Collective Bargaining and Exit Options

237

(4)

Summary

241

(1)

Bibliographic Notes

241

(3)

8 Bargaining and Information

244

(24)

Basic Models of the Litigation Process

244

(7)

Modeling Separate Trials for Liability and Damages

251

(9)

Information and Selection Bias

260

(1)

Discovery Rules and Verifiable Information

261

(5)

Summary

266

(1)

Bibliographic Notes

266

(2)

Conclusion: Information and the Limits of Law

268

(7)

Notes

275

(14)

References

289

(12)

Glossary

301

(18)

Index

319

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Game Theory and the Law

Summary

Table of Contents

Supplemental Materials