Seminario CEDE - Alvaro Sandroni

We ask whether the decisions of a rational and impartial judge can be distinguished from a coin toss. The question is inspired by the logic of the selection effect: Cases that have a clear outcome tend to be settled out of court. But that means that the cases that tend to go to court are often decided by small shocks on perceptions, the equivalent of a coin toss. That conclusion changes when judges are biased in their prior beliefs. In that event, outcomes will be determined exclusively by the judge’s prior beliefs.