Information Acquisition under Persuasive Precedent versus Binding Precedent (Preliminary and Incomplete)

    We compare two institutions: persuasive precedent and binding precedent. Under persuasive precedent, the judge is not required to follow previous rulings but can use the information acquired in an investigation made in a previous period. Under binding precedent, however, the judge must follow previous rulings when they apply. In both a three-period model and an infinite-horizon model, we find that the incentive to investigate for the judge is stronger in earlier periods when there are few precedents under binding precedent than under persuasive precedent, but as more precedents are established over time, the incentive to investigate becomes weaker under binding precedent. Even though the judge's dynamic payoff is always higher under persuasive precedent, social welfare can be higher under binding precedent because of the more intensive investigation conducted early on.

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