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date: 16 May 2021

Abstract and Keywords

Behavioural economics has become a leading force in applied economics, including in economic analysis of law. At the heart of behavioural economics is the concept of bounded rationality. Bounded rationality suggests that humans face important limitations in knowledge and decision-making capability. Such limitations have clear importance to both the understanding and the improvement of the legal system. Knowledge limitations present a particularly compelling area for legal analysis. Two case studies of debiasing through law in response to knowledge limitations reveal the potential mechanisms by which law may ease such limitations among boundedly rational actors. In such cases of debiasing through law, empirical evidence plays a pivotal role, as this evidence both identifies the existence of knowledge limitations in the first instance and provides a means by which to assess whether a given legal rule allays such limitations.

Keywords: rationality, behavioural economics, debiasing through law, optimism bias, loss aversion, status quo bias

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