The Limits of Behavioral Decision Theory in Legal Analysis: The Case of Liquidated Damages

Discontent with the apparent tunnel vision of economic analysis of law\u27s rational choice theory, legal scholars recently have turned with enthusiasm to behavioral decision theory (BDT) to enrich their understanding of how people make decisions and of the law\u27s effect on human behavior. This article, for the first time, evaluates BDT\u27s potential contribution to legal analysis by focusing on a single, important legal paradox: Despite contract law\u27s freedom of contract paradigm, courts actively and enthusiastically police agreed damages provisions. Although the article finds an important place in legal analysis for this new discipline, the article raises and discusses several obstacles to BDT\u27s effectiveness