Behavioural economics of internationally unifying private law

The success and attractiveness of internationally unified private law by Unidroit or UNCITRAL depend not only on its economic efficiency but also on its ability to address the psychological biases and cognitive limitations inherent in decision-making processes. This chapter applies behavioural economics to understand the challenges and opportunities associated with international unification of private law. By acknowledging the existence of bounded rationality, behavioural economics offers a more realistic approach to analysing the decision-making processes at various levels—international, national, and individual. The drafting and adoption of unified private law on the international level must consider the influence of biases such as the endowment effect and loss aversion to ensure that path-dependence does not hinder the creation of effective and innovative legal instruments. At the national level, governments and legislative bodies must actively counteract biases and overcome hesitations when considering accession and implementation of internationally unified private law. Utilising choice architecture and appreciating network externalities can be instrumental in fostering positive decision-making dynamics and encouraging the adoption of unified legal frameworks. On the individual level, private parties can benefit from the economic advantages offered by internationally unified private law. Yet in awareness of bounded rationality affecting private parties particularly, employing a choice architecture that defaults to the international regime while allowing deviations to national law is recommendable, since it is liberally paternalistic and guides private parties towards advantageous outcomes. Educational and other support initiatives for advisors further help to combat path-dependence and to ensure well-informed decision-making.