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We develop a litigant-based model of rule selection where parties choose to litigate rules that are efficient between two parties, but inefficient as between a potential class or potentially joined litigants and a counter-party. Collective action problems lead to incomplete party formation, which generates continuous litigation of seemingly efficient rules. By accounting for externalities borne by non-parties, we show that rules which are allocatively efficient across both parties and non-parties are evolutionary stable for any given judicial ideology or judicial preference for prestige, thus preserving the explanatory power of the Efficiency of Common Law Hypothesis. [ABSTRACT FROM AUTHOR]
