Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98416
Authors: 
Christmann, Robin
Year of Publication: 
2013
Series/Report no.: 
Diskussionspapier, Helmut-Schmidt-Universität, Fächergruppe Volkswirtschaftslehre 137
Abstract: 
Judges become ambitious decision makers when they face appellate review. This paper applies a contract theoretic perspective to the behavior of self-interested trial judges in a twolevel court system and analyzes the consequences for contracting in 'the shadow of' the court. Confronted with the factual ambiguity of an assigned case, rational judges pursue an (privately) optimal strategy to conclude the dispute and tip the scales of the trial outcome. We show that even if judges generally dislike errors and have no personal preference for a specific party, these effects of judicial agency manipulate the implemented court accuracy and degrade the contract outcome. Our implications put into perspective the traditional function of appellate courts to foster the accuracy of enforcement and identify the need for a complex measurement of judicial performance. The model also reveals that a judicial tendency to conclude lawsuits in the conciliatory hearing may overly strain contract output.
Subjects: 
Court error
judicial behavior
reputation
contract theory
JEL: 
C72
K12
K41
Document Type: 
Working Paper

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