Template-Type: ReDIF-Paper 1.0


Author-Name: Barbara Antonioli
Author-Email: barbara.antonioli@usi.ch

Author-Name: Federico Trombetta
Author-Email: federico.trombetta@unicatt.it



Title: Reversal Costs and Executive Overreach
Abstract: Executives may implement legally contestable policies aggressively before courts reach a final legality determination, creating reliance and other sunk effects that make reversal costly. We study a complete-information sequential game in which an executive chooses policy aggressiveness and a court then decides whether to uphold the policy or strike it. If reversal costs increase sufficiently convexly in aggressiveness, the court strikes mild policies but upholds sufficiently aggressive ones to avoid disruption. Anticipating this, the executive overreaches—choosing a policy more extreme than its ideal point—to deter full reversal, yielding inefficient excess implementation relative to a commitment benchmark. Institutions that limit pre-review sunk effects (stays, phased implementation, expedited review) mitigate this distortion.
Creation-Date: 2026

File-URL: http://dipartimenti.unicatt.it/diseis-wp_2602.pdf
File-Format: Application/pdf
Number: dis2602
Classification-JEL:  D72, D74, K23, K40, P16
Handle: RePEc:dis:wpaper:dis2602