New Economics Papers
on Law and Economics
Issue of 2008‒11‒25
four papers chosen by
Jeong-Joon Lee, Towson University

  1. Politicians: Be Killed or Survive By Bruno S. Frey; Benno Torgler
  2. Scarcity of Ideas and Options to Invest in R&D By Nisvan Erkal; Suzanne Scotchmer
  3. On shoplifting and tax fraud: An action-theoretic analysis of crime By Kroneberg, Clemens; Heintze, Isolde; Mehlkop, Guido
  4. Contracts as Reference Points - Experimental Evidence By Ernst Fehr; Oliver D. Hart; Christian Zehnder

  1. By: Bruno S. Frey; Benno Torgler
    Abstract: In the course of history, a large number of politicians have been assassinated. Rational choice hypotheses are developed and tested using panel data covering more than 100 countries over a period of 20 years. Several strategies, in addition to security measures, are shown to significantly reduce the probability of politicians being attacked or killed: extended institutional and governance quality, democracy, voice and accountability, a well functioning system of law and order, decentralization via the division of power and federalism, larger cabinet size and strengthened civil society. There is also support for a contagion effect.
    Keywords: Assassinations; rational choice; governance; democracy; dictatorship; deterrence; protection
    JEL: D01 D70 K14 K42 Z10
    Date: 2008–10
  2. By: Nisvan Erkal; Suzanne Scotchmer
    Abstract: We consider a model of the innovative environment where there is a distinction between ideas for R&D investments and the investments themselves. We investigate the optimal reward policy and how it depends on whether ideas are scarce or obvious. By foregoing investment in a current idea, society as a whole preserves an option to invest in a better idea for the same market niche, but with delay. Because successive ideas may occur to different people, there is a conflict between private and social optimality. We argue that private incentives to create socially valuable options can be achieved by giving higher rewards where "ideas are scarce." We then explore how rewards should be structured when the value of an innovation comes from its applications, and ideas for the innovation may be more or less scarce than ideas for the applications.
    Keywords: Ideas; patents; intellectual property, innovation; options; nonobviousness
    JEL: O34 K00 L00
    Date: 2008
  3. By: Kroneberg, Clemens (Sonderforschungsbereich 504); Heintze, Isolde (Administrative District Spree-Neiße, Coordination of Social Planning); Mehlkop, Guido (Institut für Soziologie, Lehrstuhl Makrosoziologie, Technische Universität Dresden)
    Abstract: The article evaluates different theories of action in the area of crime research. A narrow version of rational choice theory assumes actors to choose in an instrumental, outcome-oriented way. It hypothesises that individuals weight the costs and benefits of criminal acts with subjective probabilities. In contrast, a wide version of the theory allows individuals to derive utility directly from choosing certain actions. Previous studies either do not directly test these theories or yield inconsistent results. We show that a meaningful test of these rival rational choice explanations can only be conducted if a broader view is adopted that takes into account the interplay of moral norms and instrumental incentives. Such a view can be derived from the Model of Frame Selection (Kroneberg 2005) and the Situational Action Theory of Crime Causation (Wikström 2004). Based on these theories, we analyze the willingness to engage in shoplifting and tax fraud in a sample of 2,130 adults from Dresden, Germany. In line with our theoretical expectations, we find that only respondents who do not feel bound by moral norms consider instrumental incentives. Where norms have been strongly internalised and in the absence of neutralisation techniques which legitimise norm-breaking, instrumental incentives are irrelevant.
    Date: 2008–11–05
  4. By: Ernst Fehr; Oliver D. Hart; Christian Zehnder
    Abstract: In a recent paper, Hart and Moore (2008) introduce new behavioral assumptions that can explain long-term contracts and important aspects of the employment relation. However, so far there exists no direct evidence that supports these assumptions and, in particular, Hart and Moore's notion that contracts provide reference points. In this paper, we examine experimentally the behavioral forces stipulated in their theory. The evidence confirms the model's prediction that there is a tradeoff between rigidity and flexibility in a trading environment with incomplete contracts and ex ante uncertainty about the state of nature. Flexible contracts - which would dominate rigid contracts under standard assumptions - cause a significant amount of shading on ex post performance, while under rigid contracts, much less shading occurs. Thus, although rigid contracts rule out trading in some states of the world, parties frequently implement them. While our results are broadly consistent with established behavioral concepts, they cannot easily be explained by existing theories. The experiment appears to reveal a new behavioral force: ex ante competition legitimizes the terms of a contract, and aggrievement and shading occur mainly about outcomes within the contract.
    JEL: D0 K0 C9
    Date: 2008–11

This issue is ©2008 by Jeong-Joon Lee. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.