ABSTRACT
A. Introduction Traditional law and economics analysis is steeped in the neoclassical tradition, which ties welfare to the satisfaction of revealed preferences and posits that actors will maximise their utility by making rational decisions based on available information. The rationality assumption underlying this analytic approach is, by design, stylised. In its purest form, it attributes decision-making prowess that few people in the real world possess: consistent preferences, indifference to sunk costs, nonaltruism, stable maximum-buy and minimum-sell prices, and disinterest in fairness. Such simplifying assumptions, however, serve an important purpose: they permit economists to construct models using mathematical methods of constrained optimisation to predict conduct. The goal is to identify explanatory variables that affect behaviour, which relationship econometricians then attempt to measure empirically. The concept of rational choice has pervaded this book’s discussion of tort, crime, property, contract, litigation, competition, and regulation, which account relies on price theory to predict how the law can affect conduct by changing the shadow price of various behaviours ranging from criminal offences and negligent conduct to the decision whether or not to fi le a lawsuit.
