This module provides the students with effective decision analysis skills, coupled with comprehensive theoretical background in the fields of decision making, game theory, and contracting theory to provide the theoretical context for applied decision analysis in a legal context. Aspects of various decision-making theories will be examined which may include:
(1) Decision Analysis involving independent decision-making under uncertainty. This may include basic probabilistic modelling, decision tree construction and rollback, assessment of probabilities and ranges, sensitivity analysis, analysis of risk profiles and risk-attitudes, and application of decision analysis to litigation.
(2) Game Theory involving interdependent decision-making under certainty and uncertainty. This may include consideration of relevant case studies, sequential and simultaneous games, common cooperative and noncooperative games, dominant strategy, iterated dominance and Nash equilibria, information asymmetry, Akerlof’s adverse selection and moral hazard, and specific application of game theory in the legal setting.
(3) Contracting Theory involving function of contracts and key elements of effective agreements. This may include risk allocation and incentive analysis, value creation in legal work, impact of strategic considerations and information asymmetry, probabilistic analysis of zone of possible settlement in litigation, and analysis of common contracts such as construction and production contracts, principal-agent contracts, sale and lease of property contracts, financing contracts and joint venture agreements.
(4) Decision-Making Irrationality involving various aspects of bounded rationality and judgmental heuristics, information availability driven biases, anchoring, judgmental overconfidence, and instances of bounded awareness in strategic settings (inattention and change blindness, winner’s curse in negotiation and in auctions).
Classes combine classic academic teaching with a case method approach with particular emphasis on utilising the presented material for improvement of students’ strategic decision making in the legal context.
2.15 hour examination