ABSTRACT
How strictly should the law regulate false defamatory statements? We first show that the presence of judicial errors often puts defamation law on a Laffer curve: regulation that is too lax or too strict is inferior to moderate regulation. While moderate regulation is ideal, it is not always attainable, due to practical and legal constraints. With these constraints, the presence of Bayesian audiences can cause the optimal regulation to be laxer than is prescribed by standard models with naïve audiences. This highlights the importance of accounting for the impact of defamation laws on belief formation.
Arbel, Yonathan A and Mungan, Murat C, Defamation with Bayesian Audiences (August 4, 2022), Journal of Legal Studies, volume 52, 2023, Texas A&M University School of Law Legal Studies Research Paper No 23-66.
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