New Economics Papers
on Law and Economics
Issue of 2007‒02‒17
twelve papers chosen by
Jeong-Joon Lee, Towson University

  1. Cumulative Innovation, Sampling and the Hold-up Problem By Rufus Pollock
  2. In litigation: how far do the "haves" come out ahead? By Zhou,Jun
  3. Fighting Corruption with Asymmetric Penalties and Leniency By Johann Graf Lambsdorff; Mathias Nell
  4. Bargaining at Divorce: The Allocation of Custody By Christine Atteneder; Martin Halla
  5. How to Organize Crime By Heski Bar-Isaac; Mariagiovanna Baccara
  6. Accuracy versus Falsification Costs: The optimal Amount of Evidence under different Procedures By Winand Emons; Claude Fluet
  7. Detection avoidance and deterrence: some paradoxical arithmetics. By Eric Langlais
  8. The Economics of a Centralized Judiciary: Uniformity, Forum Shopping and the Federal Circuit By Atkinson, Scott; Marco, Alan C.; Turner, John L.
  9. Population Trends, Convictions and Imprisonment: Demographic Divergence, Dichotomy and Diversity By Ian Pool; Sandra Baxendine
  10. New Zealand Regions, 1986-2001: Dependency and Development of Social Capital By Ian Pool; Sandra Baxendine; William Cochrane; James Lindop
  11. The Oracle/PeopleSoft Case: Unilateral Effects, Simulation Models and Econometrics in Contemporary Merger Control By Oliver Budzinski; Arndt Christiansen
  12. Simulating the enforcement policies for irregular sector in the Italian labour reform By Bonaventura, Luigi

  1. By: Rufus Pollock
    Abstract: With cumulative innovation and imperfect information about the value of innovations, intellectual property rights can result in hold-up and therefore it may be better not to have them. Extending the basic cumulative innovation model to include 'sampling' by second-stage firms, we find that the lower the cost of sampling, or the larger the differential between high and low value second-stage innovations, the more likely it is that a regime without intellectual property rights will be preferable. Thus, technological change which reduces the cost of encountering and trialling new 'ideas' implies a reduction in the socially optimal level of rights such as patents and copyright.
    Keywords: Cumulative Innovation; Hold-Up; Sampling; Intellectual Property
    JEL: K3 L5 O3
    Date: 2006
  2. By: Zhou,Jun (Tilburg University, Center for Economic Research)
    Abstract: This paper studies the consequences of asymmetric litigation costs. Under three different protocols: static legal process, dynamic legal process with exogenous sequencing and dynamic legal process with endogenous sequencing, solutions are obtained for the litigation e®orts and the expected value of lawsuits on each side. Outcomes are evaluated in terms of two normative criteria: achieving `justice' and minimizing aggregate litigation cost. The theory implies that a moderate degree of asymmetry may improve access to justice. The dynamics of legal process may accentuate or diminish the e®ect of asymmetry. The endogenous sequencing protocol minimizes cost and may improve access to justice.
    Keywords: access to justice;endogenous sequencing;dynamics of litigation process; resource dissipation
    JEL: C72 D63 D72 K41
    Date: 2007
  3. By: Johann Graf Lambsdorff; Mathias Nell
    Abstract: Corrupt arrangements are characterized by a high risk of opportunism: double-dealing, whistle-blowing and extortion are significant uncertainties for participants in corrupt transactions. This paper demonstrates how legislators may use an asymmetric design of (criminal) sanctions and leniency programs to amplify these inherent risks, thereby destabilizing corrupt arrangements. It is also shown that asymmetric penalties and (ex-ante) leniency do not necessarily interfere with the goal of deterrence and may be a useful tool to disband the ‘pact of silence’ characteristic of corrupt arrangements. In particular, we show that bribe-takers should less be penalized for taking and more for reciprocating a bribe. Likewise, bribe-givers should be punished for giving bribes, but not for accepting the bribetakers’ reciprocity.
    Keywords: Corruption, Asymmetric Penalties, Leniency, (Self-) Reporting, Whistle-blowing
    JEL: K42 D73
    Date: 2007–02–14
  4. By: Christine Atteneder (Johannes Kepler University of Linz); Martin Halla (Johannes Kepler University of Linz and IZA)
    Abstract: We model the bargaining process of parents over custody at the time of divorce. First we assume an institutional setting where only sole custody is available. In a second step we reform this institutional setting and introduce the possibility of joint custody. We show that some parents, who would not be able to find an agreement in a sole custody regime, can find an agreement after the joint custody reform. Accordingly, our empirical analysis shows that the introduction of joint custody enables more parents to divorce by mutual consent.
    Keywords: (joint) custody, divorce, family law, bargaining
    JEL: J12 J13 K36 D1 C78
    Date: 2007–01
  5. By: Heski Bar-Isaac; Mariagiovanna Baccara
    Date: 2006
  6. By: Winand Emons; Claude Fluet
    Abstract: An arbiter can decide a case on the basis of his priors or he can ask for further evidence from the two parties to the conflict. The parties may misrepresent evidence in their favor at a cost. The arbiter is concerned about accuracy and low procedural costs. When both parties testify, each of them distorts the evidence less than when they testify alone. When the fixed cost of testifying is low, the arbiter hears both, for intermediate values one, and for high values no party at all. The arbiter's ability to remain uninformed as well as sequential testifying makes it more likely that the arbiter requires evidence.
    Keywords: evidence production; procedure; costly state falsification; adversarial; inquisitorial
    JEL: D82 K41 K42
    Date: 2007–01
  7. By: Eric Langlais
    Abstract: This paper extends Malik's (1990) analysis to the case where criminals' avoidance efforts and public expenditures in the detection of criminals are strategic complements in the aggregate technology of control of illegal behaviours. In this set up, we show that whenever criminals' avoidance efforts are more sensitive to the frequency than to the severity of sanctions, it is always socially efficient to set the fine at the maximal possible level. However, several paradoxical consequences occur: there may exist overdeterrence at optimum; more repressive policies lead to less arrestations of offenders while more crimes may be committed; at the same time, the society may be closer to the first best number of crimes.
    Keywords: deterrence, avoidance activities, optimal enforcement of law.
    JEL: D81 K42
    Date: 2007
  8. By: Atkinson, Scott (University of Georgia Department of Economics); Marco, Alan C. (Vassar College Department of Economics); Turner, John L. (University of Georgia Department of Economics)
    Abstract: In 1982, the US Congress established the Court of Appeals for the Federal Circuit (CAFC) as the sole appellate court for patent cases. Ostensibly, this court was created to eliminate inconsistencies in the application and interpretation of patent law across federal courts, and thereby mitigate the incentives of patentees and alleged infringers to "forum shop" for a preferred venue. We perform the first econometric study of the extent of non-uniformity and forum shopping in the pre-CAFC era and of the CAFC's impact on these phenomena. We find that in patentee-plaintiff cases the pre-CAFC era was indeed characterized by significant non-uniformity in patent validity rates across circuits and by forum shopping on the basis of validity rates. We find weak evidence that the CAFC has increased uniformity of validity rates and strong evidence that forum shopping on the basis of validity rates ceased several years prior to the CAFC's establishment. In patentee-defendant cases, we find that validity rates are lower on average, but do not find either significant non-uniformity of validity rates across circuits or significant forum shopping.
  9. By: Ian Pool (University of Waikato); Sandra Baxendine (Waikato District Health Board)
    Abstract: The links between population patterns and trends, and policy and planning for the justice system is important. The trends in the number of convictions and imprisonments by regional councils are investigated for the period 1986 to 2001. This does not just focus on Custodial sentences but also looks at other types of sentences such as monetary and community sentences. Additionally, a regional estimate of the muster in prison is derived to give “normal” place of residence of those in prison. The relationship of imprisonment to other factors such as income, unemployment, sickness/invalid benefit rates, labour force participation rates and ethnicity is investigated. Some policy implications of these findings are presented.
    Keywords: Convictions, Imprisonment, Population, Regions, New Zealand
    JEL: I38 K14 K42 R23
    Date: 2006–02–17
  10. By: Ian Pool (University of Waikato); Sandra Baxendine (Waikato District Health Board); William Cochrane (University of Waikato); James Lindop (University of Waikato)
    Abstract: The development of social capital is significantly affected by benefit dependency of the population. This paper investigates measures of social cohesion and measures of dependency on society across the regions of New Zealand. Some of the measures looked at specifically are social security benefit use and convictions, custodial sentences and the prison muster across regions. The paper also focuses on housing and specifically considers overcrowding.
    Keywords: Benefits, Overcrowding, Convictions, Regions, New Zealand
    JEL: I38 K42 R21 R23
    Date: 2006–03–05
  11. By: Oliver Budzinski; Arndt Christiansen (Faculty of Business Administration and Economics, Philipps Universitaet Marburg)
    Abstract: An increasingly important part of contemporary merger control both in the US and the EU is unilateral effects analysis, particularly with regard to oligopolistic mergers. In practice, this requires econometric analyses of past market data and, above all, the construction of simulation models in order to quantify the price effects in each specific case. The review of the merger between the software firms Oracle and PeopleSoft in 2003/04 has been the most important instance of parallel application of these sophisticated economic tools by the EU and US authorities so far. This makes an in-depth study of the case going from the controversial issue of market definition to the specificities of the competitive assessment worthwhile. Therefore, we highlight certain similarities as well as (minor) differences between the EU and US proceedings. Interestingly, despite serious initial concerns the transaction was not blocked nor even required to be modified in the two jurisdictions. We derive a number of interesting insights and, in particular, point out problems and lessons associated with the use of sophisticated economic tools in contemporary merger control. In addition to case-specific factors, the major insights encompass the continued relevance of market definition, the need to accompany predictive economic evidence with compatible reasoning and the benefits of including the economics of dynamic and evolutionary competition.
    Keywords: Merger control, unilateral effects, econometric analysis, simulation models, market definition
    JEL: F02 K21 L41
    Date: 2007
  12. By: Bonaventura, Luigi
    Abstract: In this paper an agent-based model (abm) will be used to study the effects of enforcement policy in Italy: d.lgs. 124/2004. Three kinds of policy will be tested in the model: control, sanction and legitimacy-regulation. The first policy is based on the number of inspectors present in the economy; the second is defined by the magnitude of punishment; the third is measured by the social legitimacy of regulation. This simulation has produced a number of results, the most important of which are: the negligible influence of control increasing to enforce irregularity; the strong influence of the level of punishment on the irregularity ratio in all Italian areas; the good political choice to increase the social legitimacy to regulation in promoting regularity.
    Keywords: enforcement policies; irregular sector; agent-based model
    JEL: C63 O17 K42 E61
    Date: 2006–12

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