New Economics Papers
on Law and Economics
Issue of 2008‒11‒04
five papers chosen by
Jeong-Joon Lee, Towson University

  1. A SSNIP test for two-sided markets: the case of media By Lapo Filistrucchi
  2. Deterrence, Incapacitation, and Repeat Offenders By Thomas J. Miceli
  3. Religion, Social Capital, and Business Bankruptcy in the United States, 1921-1932 By Bradley A. Hansen; Mary Eschelbach Hansen
  4. Complementary Patents and Market Structure By Klaus M. Schmidt;
  5. Marriage, Divorce and Interstate Risk Sharing By Martin Halla; Johann Scharler

  1. By: Lapo Filistrucchi (Department of Economics, CentEr & TILEC, Tilburg University)
    Abstract: I discuss the design and implementation of a SSNIP test in order to identify the relevant market in a media market. I argue that in such a two-sided market the traditional SSNIP test cannot be applied as it is usually conceived but rather should be modified in order to take into account indirect network externalities. I discuss the issues of which price the hypothetical monopolist should be thought of as raising, of whether we should look at profits changes on only one side or on both sides of the market and of which feedback among the two sides of the market we should take into account. I then derive the relevant formulas for Critical Loss Analysis. These look much uglier than in a single-sided market but in fact they are easy to calculate as they are still expressed in terms of elasticities and of current observed markups, prices and quantities. Data requirements are however higher as one needs to estimate the matrixes of the own and cross price elasticities of demand on the two-sides of the market and the matrixes of the network effects. The paper fills a gap in the economic literature, so much more as market definition in media markets is at the centre of many recent competition policy and regulation cases around the world.
    Keywords: two-sided markets, SSNIP test, Hypothetical Monopolist test, critical loss analysis, critical elasticity analysis, market definition, media
    JEL: L40 L50 K20
    Date: 2008–10
  2. By: Thomas J. Miceli (University of Connecticut)
    Abstract: This paper develops an economic model of criminal enforcement that combines the goals of deterrence and incapacitation. Potential offenders commit an initial criminal act if the present value of net private gains is positive. A fraction of these offenders become habitual and commit further crimes immediately upon release from their initial prison term (if any). The optimal punishment scheme in this setting generally involves a finite prison term for first-time offenders (based on the goal of deterrence), and an infinite (life) sentence for repeat offenders (based on the goal of incapacitation).
    Keywords: Deterrence, incapacitation, prison, repeat offenders
    JEL: K14 K42
    Date: 2008–10
  3. By: Bradley A. Hansen; Mary Eschelbach Hansen
    Abstract: We consider the value of social capital that derives from membership in a church. American states with larger churchgoing populations had lower business bankruptcy rates from 1921 to 1932, and states in which the churchgoing population was concentrated in few churches had business bankruptcy rates that were lower still. Both voluntary and involuntary bankruptcy were lower in states with higher church membership. The evidence suggests that church membership acted on bankruptcy through a safety net mechanism and not solely through indicating a preference for honoring commitment.
    Keywords: business bankruptcy, church membership, social capital
    JEL: N22 N82 K29
    Date: 2008–09
  4. By: Klaus M. Schmidt; (Department of Economics, University of Munich, Ludwigstrasse 28, D-80539 Muenchen, Germany; )
    Abstract: Many high technology goods are based on standards that require access to several patents that are owned by different IP holders. We investigate the royalties chosen by IP holders under different market structures. Vertical integration of an IP holder and a downstream producer solves the double mark-up problem between these firms. Nevertheless, it may raise royalty rates and reduce output as compared to non-integration. Horizontal integration of IP holders (or a patent pool) solves the complements problem but not the double mark-up problem. Vertical integration discourages entry and reduces innovation incentives, while horizontal integration always encourages entry and innovation.
    Keywords: IP rights, complementary patents, standards, licensing, patent pool, vertical integration
    JEL: L15 O31 L24 O32 K11
    Date: 2008–09
  5. By: Martin Halla; Johann Scharler
    Abstract: In this paper we study the importance of marriage for interstate risk sharing. We find that US states in which married couples account for a higher share of the population are less exposed to state-specific output shocks. Thus, marriages do not just improve the allocation of risk at the individual level, but also have implications for the allocation of risk at the more aggregated state-level. Quantitatively, the impact of marriage on interstate risk sharing varies over divorce regimes.
    Keywords: Risk sharing, marriage, divorce, family law
    JEL: J12 E21 K36 G21
    Date: 2008–10

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