A Behavioral Analysis of Private Judging

Abstract

Much attention has been given to how cognitive illusions - both heuristics and cognitive biases - affect decision making by juries. Less, albeit increasing, attention has been given to how cognitive illusions affect decision making by judges. Almost no attention, however, has been given to how cognitive illusions might affect decision making by arbitrators. This article extends the behavioral analysis of the legal system to private judging, and considers the implications of that analysis for the debate on pre-dispute consumer arbitration clauses. Empirical evidence on the effect of cognitive illusions in arbitral decision making is extremely limited. Further complicating the analysis of private judging are structural differences between arbitration hearings and jury trials, which may heighten or dampen the effect of cognitive illusions on decision making in the real world. If arbitrators are assumed to be more like judges than jurors in their decision making - a seemingly reasonable assumption - studies comparing the effect of cognitive illusions on judges and jurors provide at least a starting point for making predictions about arbitral decision making. On this view, the article reaches the very tentative conclusion that arbitrators, like judges, may be less susceptible to at least some cognitive illusions than jurors. If subsequent research bears out this tentative conclusion, it would have important implications for the ongoing debate over consumer arbitration. If arbitral decision making is less subject than jury decision making to the effects of cognitive illusions, then the use of arbitration may improve the accuracy of dispute resolution, reducing the risk of overcompensation (rather than resulting in undercompensation). This is not to suggest that such utilitarian arguments should be used to override constitutional protections, or that the jury might not serve other functions than simply dispute resolution. Instead, the point simply is that when Congress (or another policy maker) is considering whether to restrict the enforceability of consumer arbitration agreements, it should not assume that juries necessarily make better decisions than arbitrators. To the contrary, restricting the availability of arbitration may reduce the accuracy of dispute resolution, thereby imposing real costs on the parties to consumer contracts.