The Effects of Reference Dependence on Judicial Persuasion

I study a model of persuasion in which a loss-averse judge has reference-dependent preferences. When the loss from wrongful conviction looms largest, the outcome that forms the judge's reference point has significant implications for the effectiveness of persuasion. When acquitting the innocent or the guilty is the reference point, an increase in the judge's loss aversion decreases the prosecutor's gain from persuasion. On the other hand, when convicting the guilty is the reference point, this gain increases as the judge becomes more loss-averse. With a reference-dependent jury, the interplay between the reference point and the complementarity of the jurors' actions offers a novel theoretical explanation for the differing behavior of judges and juries.