A Model of the Optimal Complexity of Legal Rules
Harvard Law School; National Bureau of Economic Research (NBER)
JOURNAL OF LAW, ECONOMICS, AND ORGANIZATION, Vol 11 No 1, Spring 1995
Legal rules often are complex in order to distinguish different types of behavior that may have different consequences. Greater complexity thus allows better control of behavior. But more complex rules are more costly for individuals to understand ex ante and for a court to apply ex post. Also because of the cost, some individuals will choose not to learn complex rules. This article models the effects of complexity on individuals' decisions to acquire information, choices about whether to act, and reports of their actions to an enforcement authority. It determines when more complex rules improve welfare and how this depends on whether enforcement involves self-reporting of behavior.
JEL Classification: K00
Date posted: August 29, 1998
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