Rats in the kaleidoscope: rationality, irrationality and the economics & psychology of opting in and out of the CISG (Kaleidoscope part II)

Why do lawyers in some jurisdictions continue to ‘automatically’ exclude the 1980 UN Convention on Contracts for the International Sale of Goods (CISG) in their choices of law for international sales contracts. Why do lawyers in other jurisdictions approach the decision very differently?

This paper identifies the key reasons for opting in or out of the CISG across various jurisdictions, and then turns to economics and psychology in order to expose the underlying causes for choices of law for international sales contracts.

A number of perspectives are utilized within this analysis: from neoclassical economics, including agency costs, externalities and rational decision making within game theory frameworks; behavioral economics, including notions of path dependence, satisficing and network effects; to psychological perspectives including heuristics and group polarization.

The breadth of this approach provides new insight into the reasons for choices of law, and enables a thorough analysis of current and future trends in exclusion of the CISG. The author concludes that choices of law in jurisdictions that presently overwhelmingly favor ‘automatic’ exclusion of the CISG will inevitably change.