New Economics Papers
on Law and Economics
Issue of 2010‒05‒02
three papers chosen by
Jeong-Joon Lee, Towson University

  1. Optimal Market Design By Boone, J.; Goeree, J.K.
  2. Does Regulation of Built-In Security Reduce Crime? Evidence From a Natural Experiment By Vollaard, B.A.; Ours, J.C. van
  3. Pollution Standards, Technology Investment and Fines for Non-Compliance By Arguedas, Carmen

  1. By: Boone, J.; Goeree, J.K. (Tilburg University, Center for Economic Research)
    Abstract: This paper introduces three methodological advances to study the optimal design of static and dynamic markets. First, we apply a mechanism design approach to characterize all incentive-compatible market equilibria. Second, we conduct a normative analysis, i.e. we evaluate alternative competition and innovation policies from a welfare perspective. Third, we introduce a reliable way to measure competition in dynamic markets with nonlinear pricing. We illustrate the usefulness of our approach in several ways. We reproduce the empirical finding that innovation levels are higher in markets with lower price-cost margins, yet such markets are not necessarily more competitive. Indeed, we prove the Schumpeterian conjecture that more dynamic markets characterized by higher levels of innovation should be less competitive. Furthermore, we demonstrate how our approach can be used to determine the optimal combination of market regulation and innovation policies such as R&D subsidies or a weakening of the patent system. Finally, we show that optimal markets are characterized by strictly positive price-cost margins.
    Keywords: competition policy;dynamic markets;competition measures;Schumpeter;mechanism design
    JEL: K21 L40 O31
    Date: 2010
  2. By: Vollaard, B.A.; Ours, J.C. van (Tilburg University, Center for Economic Research)
    Abstract: As of 1999, all new-built homes in the Netherlands have to have burglary-proof windows and doors. We provide evidence that this large-scale government intervention in the use of self-protective measures lowers crime and improves social welfare. We find the regulatory change to have reduced burglary in new-built homes from 1.1 to 0.8 percent annually, a reduction of 26 percent. The findings suggest that burglars avoid old, less-protected homes that are located in the direct vicinity of the new, better-protected homes. The presence of a negative externality on older homes is ambiguous. We find no evidence for displacement to other property crimes including theft from cars and bicycle theft. Even though the regulation of built-in security does not target preventative measures at homes that are most at risk, the social benefits of the regulation are likely to exceed the social costs.
    Keywords: victim precaution;government regulation;crime
    JEL: K42 H11 H23
    Date: 2010
  3. By: Arguedas, Carmen (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)
    Abstract: In this paper, we analyze whether it is socially desirable that fines for exceeding pollution standards depend not only on the degree of non-compliance but also on the firm's level of investment in environmentally friendly technologies. For that purpose, we consider a partial equilibrium framework where a representative firm chooses the pollution level and the investment effort in response to an environmental policy composed of a pollution standard, an inspection probability and a fine for non-compliance. We find that the fine should not depend on the firm's investment effort if the optimal policy induces compliance. However, the fine should strictly decrease with investment effort under non-compliance and positive social costs of sanctioning. Interestingly, the optimal fine considers the relative importance of monitoring and sanctioning costs in the enforcement problem.
    Keywords: pollution standards; costly inspections; environmentally friendly technologies; non-compliance; optimal fines.
    JEL: K32 K42 L51 Q28
    Date: 2010–04

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