Rats in the Kaleidoscope: Rationality, Irrationality, and the Economics and Psychology of Opting In and Out of the CISG (Kaleidoscope Part II)

Vindobona Journal of International Commercial Law & Arbitration, Vol. 13, p. 157, 2009

22 Pages Posted: 28 Nov 2009

See all articles by Lisa Spagnolo

Lisa Spagnolo

Monash University - Faculty of Law

Date Written: July 1, 2009

Abstract

Why do lawyers in some jurisdictions continue to ‘automatically’ exclude the 1980 UN Convention on Contracts for the International Sale of Goods (CISG) in their choices of law for international sales contracts. Why do lawyers in other jurisdictions approach the decision very differently?

This paper identifies the key reasons for opting in or out of the CISG across various jurisdictions, and then turns to economics and psychology in order to expose the underlying causes for choices of law for international sales contracts.

A number of perspectives are utilized within this analysis: from neoclassical economics, including agency costs, externalities and rational decision making within game theory frameworks; behavioral economics, including notions of path dependence, satisficing and network effects; to psychological perspectives including heuristics and group polarization.

The breadth of this approach provides new insight into the reasons for choices of law, and enables a thorough analysis of current and future trends in exclusion of the CISG. The author concludes that choices of law in jurisdictions that presently overwhelmingly favor ‘automatic’ exclusion of the CISG will inevitably change.

This paper (Kaleidoscope Part II) was presented at the first MAA Conference in honor of Peter Schlechtriem (1933-2007) in Vienna on 2 April 2009. A revised version was also presented at the Canadian Law & Economics Annual Meeting on 3 October 2009 (under the title Green Eggs & Ham). In Kaleidoscope Part I (also available on SSRN), the author utilizes empirical and anecdotal evidence to identify the primary factors behind decisions on choice of law which are explained in terms of behavioral economics, game theory and psychology in Part II.

This article is published at 13 Vindobona Journal of International Commercial Law & Arbitration 157 (2009) and is reproduced with the kind permission of the Moot Alumni Association.

Keywords: Choice of law, CISG, opt out, bargaining strength, externalities, learning costs, game theory, group polarization, satisficing, aspiration level, information costs, heuristics, herd behaviour, path dependence, agency, network effects, behavioural economics, cascades, social cascades

JEL Classification: C7, C70, C71, C72, D2, D21, D23, D6, D60, D61, D62, D63, D8, D80, D81, D82, D83, F2, F23, H30, H32,

Suggested Citation

Spagnolo, Lisa, Rats in the Kaleidoscope: Rationality, Irrationality, and the Economics and Psychology of Opting In and Out of the CISG (Kaleidoscope Part II) (July 1, 2009). Vindobona Journal of International Commercial Law & Arbitration, Vol. 13, p. 157, 2009, Available at SSRN: https://ssrn.com/abstract=1514142

Lisa Spagnolo (Contact Author)

Monash University - Faculty of Law ( email )

Wellington Road
Clayton, Victoria 3800
Australia

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