Judicial Dissent under Externalities and Incomplete Information

The issue of the stability and change of legal rules occupies a central place in the discussions of alternative ways of organizing justice and the provision of legal rules. There nonetheless remains a theoretical aspect that has never been raised in the literature on judicial decision making and legal change. Judges that are not bound by precedent and can change the law directly by overruling previous decisions have to make a particular decision about the direction the new precedent will take. We show that under incomplete information about judges’ eagerness to choose according to their ideal points, there are two candidates for the particular legal rule that is to become the new precedent: (i) judge’s private optimum; and (ii) some other legal rule that can differ from (i) and corresponds to the empirical and normative expectations of a large subset of judges within the judicial population. The individual judge that has decided not to stick to the precedent faces therefore a trade-off, he has to ch oose among alternative legal rules that yield alternative levels of public and private satisfaction of preferences.