Anchoring Effect in Real Litigation: An Empirical Study

This article studies two questions that are debated by theorists but so far have rarely been examined empirically: First, whether judges in civil law countries tend to make efficient decisions; second, whether in real litigation judges suffer from the anchoring effect. We examine cases regarding compensation by trespassers to landowners for the trespassers’ unlawful use of the land. Judges in Taiwan use the formula “rent=land value*yield rate” to compute the unjust enrichment of the trespasser. In practice, the land value is the pre-filed self-assessed land value that is below market value. Judges have a large room in determining the yield rate. Our research tests whether judges adjust the yield rate to award market rent or judges’ adjudicated rates are influenced by the rates claimed by the plaintiff (the anchor). Using randomly sampled court cases rendered by the court of the first instance in Taiwan in 2004–2012, we find that most adjudicated rents are lower than market rents; thus, courts arguably have made inefficient decisions. In addition, our structure model reveals that the plaintiff’s claimed yield rate and defendant’s claimed yield rate both have substantial and statistically significant effects on the court-adjudicated yield rate, indicating that judges in Taiwan are subject to the anchoring effect, and that counteracting anchors can be effective. * Associate Research Professor & Deputy Director of Center for Empirical Legal Studies, Institutum Iurisprudentiae, Academia Sinica, Taiwan. J.S.D., New York University School of Law. Email: kleiber@sinica.edu.tw. Correspondence author. Draft of this paper has been presented at the Cornell-Tel Aviv Empirical Legal Studies Conference held at Tel Aviv University Faculty of Law on May 6–7, 2013; Bonn Law and Economics Workshop held at Bonn University on Oct. 1, 2013; Law and Economics Workshop at the University of Michigan, Ann Arbor on Oct. 17, 2013; and the 2013 Conference for Empirical Legal Studies held at the University of Pennsylvania Law School on Oct. 25– 26, 2013. We appreciate the workshop/conference organizers (Talia Fisher, Kristoffel Grechenig, Alexander Morell, JJ Prescott, and David Abrams) for their invites and supports. We thank Yoav Dotan, Ted Eisenberg, Michael Frakes, Valerie Hans, Yoan Hermstruwer, Tamar Kricheli Katz, Isabel Marcin, Alexander Morell, Niels Petersen, JJ Prescott, Eva Schliephake, Martin Wells, and Omri Yadlin for helpful comments. With due respects, we thank Hon. Carol Lin and Hon. Janssen Yang for kindly sharing their insights with us. We also thank Shiang-Chian Chen, Sonia Chieh-han Chen, Yu-hsiang Cheng, Yichien Chu, Tzu-Yuan Chu, Ming-Chung Lin, and Ming-chia Tsai for research assistance. ** Distinguished Research Fellow and Director, Research Center for Humanities and Social Sciences, Academia Sinica; Executive Director, Center of Institution and Behavior Studies, Academia Sinica; Professor, Department of Economics, National Taiwan University. *** Assistant Research Fellow, Institute of Economics, Academia Sinica. **** Assistant Research Fellow, Commerce Development Research Institute. Chang, Chen, Lin & Liu