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Free keywords:
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JEL:
D02 - Institutions: Design, Formation, Operations, and Impact
JEL:
D21 - Firm Behavior: Theory
JEL:
D22 - Firm Behavior: Empirical Analysis
JEL:
D83 - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
JEL:
K10 - General
JEL:
K41 - Litigation Process
Abstract:
In law and economics, it is standard to model legal rules as an opportunity structure. The law’s subjects maximize expected profit, given these constraints. In such a model, the reaction to legal innovation is immediate. This is not what we observe after class action is introduced into Israeli law. For a long time, the new remedy is almost unused. Then the adoption process gains momentum. We discuss alternative options for theorizing the effect. We find that market entry is not only explained by the available information about profitability, but also by the adoption pattern of others. When deciding whether to bring further claims, law firms also react to the experiences they have made themselves. We thus explain the pattern by individual and social learning, and cannot exclude mere social imitation.
