Optimal Timing of Legal Intervention: The Role of Timing Rules

Abstract

In a recent article, Gersen and Posner (2007) examined the role of timing rules in promoting the optimal timing of legislative action. In this brief essay, we address the issue of optimal timing of lawmaking through the lens of option theory. We provide a formalization of seven alternative timing rules and evaluate the option value of those legislative strategies. This formalization allows us to evaluate the desirability of alternative timing rules in different regulatory environments.

Keywords: Legislation, timing, option value, rules, standards

JEL Classification: G13, K10, K20