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Oliver Williamson has coined the term "fundamental transformation". It captures the following situation: before they strike a deal, buyer and seller are protected by competition. Yet thereafter they find themselves in a bilateral monopoly. With common knowledge of standard preferences, both sides conclude the contract regardless if its expected value exceeds their outside options. We run an experiment to test whether additional behavioral reasons deter mutually beneficial trade. If the risk materializes, another individual makes a windfall profit. She does so by intentionally exploiting the first individual. The first individual is let down, although she has knowingly exposed herself to this risk. Participants sell the opportunity to enter the contractual relationship at a price below its expected value. This effect is driven by risk aversion, and already present if the risk is stochastic. Behavioral effects are heterogeneous. About a quarter of participants exhibit the hypothesized additional deterrent effect.

In law and economics, it is standard to model legal rules as an opportunity structure. The law's subjects maximize expected profit, given these constraints. In such a model, the reaction to legal innovation is immediate. This is not what we observe after class action is introduced into Israeli law. For a long time, the new remedy is almost unused. Then the adoption process gains momentum. We discuss alternative options for theorizing the effect. We find that market entry is not only explained by the available information about profitability, but also by the adoption pattern of others. When deciding whether to bring further claims, law firms also react to the experiences they have made themselves. We thus explain the pattern by individual and social learning, and cannot exclude mere social imitation.