A Microeconomic Model of the Demand for Civil Justice: Is One Institutional Context Better Than Another?

The paper analyzes how institutional elements affect the decision to file of risk neutral agents. In particular, we introduce an objective probability of winning given by the combination of a precedent-weight parameter (defining the type of legal system) and a transparency factor. 603,000 simulated trials, shaped upon our model, reveal two main findings: 1) the transparency level matters in terms of inefficient decisions; 2) a precedent driven system is not necessarily more efficient. Hence, policy makers should invest in increasing the level of information among courts and between courts and the parties both in civil and common law systems.