New Economics Papers
on Law and Economics
Issue of 2008‒04‒21
seven papers chosen by
Jeong-Joon Lee, Towson University

  1. Condorcet Jury Theorem: The Dependent Case By Bezalel Peleg; Shmuel Zamir
  2. Manipulating Allocation Justice: How Framing Effects can Increase the Prevalence of the Talmudic Division Principle "Shnaim Ohazin" By Yevgeni Berzak; Michael Fink
  3. Effect of Employer Access to Criminal History Data on the Labor Market Outcomes of Ex-Offenders and Non-Offenders By Keith Finlay
  4. Bribery or Just Desserts? Evidence on the Influence of Congressional Voting Patterns on PAC Contributions from Exogenous Variation in the Sex Mix of Legislator Offspring By Dalton Conley; Brian J. McCabe
  5. Socially-Tolerable Discrimination By Amegashie, J. Atsu
  6. Cartel Organization and Antitrust Enforcement By Zhijun
  7. Agglomerative Magnets and Informal Regulatory Networks: Electricity Market Design Convergence in the USA and Continental Europe By Jens Weinmann

  1. By: Bezalel Peleg; Shmuel Zamir
    Abstract: <p>We provide an extension of the Condorcet Theorem. Our model includes both the Nitzan-Paroush framework of “unequal competencies” and Ladha’s model of “correlated voting by the jurors”. We assume that the jurors behave “informatively”, that is, they do not make a strategic use of their information in voting. Formally, we consider a sequence of binary random variables X = (X<sub>1</sub>,X<sub>2</sub>, ...,X<sub>n</sub>, ...) with range in {0,1} and a joint probability distribution P. The pair (X,P) is said to satisfy the <em>Condorcet Jury Theorem</em> (CJT) if lim<sub>n→∞</sub>P(∑X<sub>i</sub>>n/2)=1. For a general (dependent) distribution P we provide necessary as well as sufficient conditions for the CJT. Let p<sub>i</sub> = E(X<sub>i</sub>), <span style="text-decoration: overline">p</span><sub>n</sub> = (p<sub>1</sub> + p<sub>2</sub>, ...+ p<sub>n</sub>)/n and <span style="text-decoration: overline">X</span><sub>n</sub> = (X<sub>1</sub> +X<sub>2</sub>, ...+X<sub>n</sub>)/n. A consequence of our results is that the CJT is satisfied if lim√n(<span style="text-decoration: overline">p</span><sub>n</sub>-1/2)=∞ and ∑<sub>i</sub>∑<sub>j≠i</sub>Cov(X<sub>i</sub>,X<sub>j</sub>) ≤ 0 for n > N<sub>0</sub>. The importance of this result is that it establishes the validity of the CJT for a domain which strictly (and naturally) includes the domain of independent jurors. Given (X,P), let <u>p</u> = liminf <span style="text-decoration: overline">p</span><sub>n</sub>, and <span style="text-decoration: overline">p</span>= limsup<span style="text-decoration: overline">p</span><sub>n</sub>. Let <u>y</u>= liminf E(<span style="text-decoration: overline">X</span><sub>n </sub>-<sub> </sub><span style="text-decoration: overline">p</span><sub>n</sub>)<sup>2</sup>, <u>y<sup>*</sup></u>= liminf E|<span style="text-decoration: overline">X</span><sub>n </sub>-<sub> </sub><span style="text-decoration: overline">p</span><sub>n</sub>| and <span style="text-decoration: overline">y</span><u><sup>*</sup></u>= limsup E|<span style="text-decoration: overline">X</span><sub>n </sub>-<sub> </sub><span style="text-decoration: overline">p</span><sub>n</sub>|. Necessary conditions for the CJT are that <u>p</u> ≥1/2 + 1/2<u>y</u><sup>∗</sup>,<u>p</u> ≥ 1/2 + <u>y</u>, and also p ≥ 1/2 + y<sup>∗</sup>. We exhibit a large family of distributions P with liminf 1/n(n-1) ∑<sub>i</sub>∑<sub>j≠i</sub>Cov(X<sub>i</sub>,X<sub>j</sub>) > 0 which satisfy the CJT. We do that by ‘interlacing’ carefully selected pairs (X,P) and (X′,P′). We then proceed to project the distributions P on the planes (<u>p</u>,<u>y</u><sup>∗</sup>) and (<u>p</u>,<u>y</u>), and determine all feasible points in each of these planes. Quite surprisingly, many important results on the possibility of the CJT are obtained by analyzing various regions of the feasible set in these planes.</p>
    Date: 2008–03
  2. By: Yevgeni Berzak; Michael Fink
    Abstract: In the role of judges in bankruptcy problems, people may prescribe various just divisions of the available goods to claimants who have rights for them. Two widespread division rules are equality and proportionality. A less known rule is the Talmudic "Shnaim Ohazin" principle, whose basic rationale is applying an equal division only to that part of the goods which is genuinely under dispute. This paper demonstrates that the ratio of subjects that prefer the "Shnaim Ohazin" principle over equality and proportionality can be increased by a simple framing manipulation. These results suggest that framing effects might be a prevalent factor in the realm of distributive justice.
    Date: 2008–04
  3. By: Keith Finlay
    Abstract: Since 1997, states have begun to make criminal history records publicly available over the Internet. This paper exploits this previously unexamined variation to identify the effect of expanded employer access to criminal history data on the labor market outcomes of ex-offenders and non-offenders. Employers express a strong aversion to hiring ex-offenders, but there is likely asymmetric information about criminal records. Wider availability of criminal history records should adversely affect the labor market outcomes of ex-offenders. A model of statistical discrimination also predicts that non-offenders from groups with high rates of criminal offense should have improved labor market outcomes when criminal history records become more accessible. This paper tests these hypotheses with criminal and labor market histories from the 1997 cohort of the National Longitudinal Survey of Youth. I find evidence that labor market outcomes are worse for ex-offenders once state criminal history records become available over the Internet, and somewhat weaker evidence that outcomes are better for non-offenders from highly offending groups. Results for ex-offenders demonstrate the presence of imperfect information about criminal records by employers. The non-offender results are consistent with statistical discrimination by employers. Estimates may be confounded by a short sample period and ongoing human capital investments, but the research design provides a unique setting for testing theories of statistical discrimination.
    JEL: D82 D83 J71 J78 K42
    Date: 2008–04
  4. By: Dalton Conley; Brian J. McCabe
    Abstract: Evidence on the relationship between political contributions and legislators' voting behavior is marred by concerns about endogeneity in the estimation process. Using a legislator's offspring sex mix as an exogenous variable, we employ a two-stage least squares estimation procedure to predict the effect of voting behavior on political contributions. Following previous research, we find that a legislator's proportion daughters has a significant effect on voting behavior for women's issues, as measured by score in the "Congressional Record on Choice" issued by NARAL Pro-Choice America. In the second stage, we make a unique contribution by demonstrating a significant impact of exogenous voting behavior on PAC contributions, lending credibility to the hypothesis that Political Action Committees respond to legislators' voting patterns by "rewarding" political candidates that vote in line with the positions of the PAC, rather than affecting or "bribing" those same votes -- at least in this high profile policy domain.
    JEL: H11 J18 K0
    Date: 2008–04
  5. By: Amegashie, J. Atsu
    Abstract: History is replete with overt discrimination on the basis of race, gender, age, citizenship, ethnicity, marital status, academic performance, health status, volume of market transactions, religion, sexual orientation, etc. However, these forms of discrimination are not equally tolerable. For example, discrimination based on immutable or prohibitively unalterable characteristics such as race, gender, or ethnicity is much less acceptable. Why? I develop a simple model of conflict which is driven by either racial (gender or ethnic) discrimination or generational discrimination (i.e., young versus old). When the conflicts are mutually exclusive, I find that racial discrimination is socially intolerable for a much wider range of parameter values relative to generational discrimination. When they are not mutually exclusive, I find that racial discrimination can be socially intolerable while generational discrimination is socially tolerable. The converse is not true. My results are not driven by a stronger intrinsic aversion to discrimination on the basis of immutable characteristics. I am able to explain why some forms of discrimination (e.g., racism) are much less tolerable than other forms of discrimination (e.g., age discrimination) without making any value judgements about either form of discrimination.
    Keywords: conflict, contest, discrimination, gender, race, generation
    JEL: D74 D72 K41
    Date: 2008–04–11
  6. By: Zhijun (ESRC Centre for Competition Policy, University of East Anglia)
    Abstract: This paper incorporates the economic theory of organizations into the framework of public law enforcement, and characterizes the dual-coalition structure of cartel organization that allows us to highlight the strategic interactions between cartel participants under different antitrust policies. We show that delegation of authorities over collusive decisions from top executives to subordinates can mitigate the temptation of renege on collusive relationships and thus contributes to facilitating collusion. This result parallels the insights in Baker, Gibbons and Murphy (2002, 2006) which find that the optimal allocation of decision rights is to minimize the maximum temptation to renege on relational contracts. Moreover, the efficiency gains of delegation in facilitating collusion can be mitigated when the corporate leniency program is introduced, in particular whenever it is unlikely to detect cartels absent leniency and the corporate liability is muc more significant than individual liability.
    Keywords: cartel organization, antitrust enforcement, leniency programs
    JEL: D23 K21 L41
    Date: 2008–04
  7. By: Jens Weinmann
    Abstract: The absence of one broadly accepted design template for liberalised electricity markets induces regulatory competition and institutional diversity. Focussing on continental Europe and the USA, this analysis explores how agents and structures accelerate or impede the move to one standard market design in the electricity sector. It reveals that market design convergence in Europe is driven by the 'Florence Consensus,' a tripartite coalition between the European Commission fostering European integration and the internal market, informal regulatory networks between grid operators, standardisation authorities and regulators, who have been coordinating their actions in the 'Florence Forum,' and epistemic communities exemplified in the Florence School of Regulation. In contrast, the United States' Federal Energy Regulatory Commission lacks support among politicians, many states' public utility commissions, the neo-liberal intelligentsia and even industrial lobbying groups to effectively push for a standardised market design. However, design convergence in the USA may be induced by the gradual expansion of multi-state markets operated by regional transmission organisations.
    Keywords: Electricity, Deregulation, Regulatory Competition, Policy Diffusion
    JEL: K23 L16 L43 L51 L94 Q48
    Date: 2007–04–04

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