New Economics Papers
on Law and Economics
Issue of 2010‒09‒03
four papers chosen by
Jeong-Joon Lee, Towson University

  1. “Assessing market dominance”: a comment and an extension By Vasilis Droucopoulos; Panagiotis Chronis
  2. No Derivative Shareholder Suits in Europe – A Model of Percentage Limits and Collusion By Kristoffel Grechenig; Michael Sekyra
  3. The More the Better? Effects of Training and Information Amount in Legal Judgments By Stephan Dickert; Britta Herbig; Andreas Glöckner; Christina Gansen; Roman Portack
  4. The Impact of Firm Entry Regulation on Long-living Entrants By Susanne Prantl

  1. By: Vasilis Droucopoulos (University of Athens); Panagiotis Chronis (Bank of Greece)
    Abstract: Melnik et al. [Melnik, A., Shy, Oz, Stenbacka, R., 2008. Assessing market dominance. Journal of Economic Behavior and Organization 68, 63-72] have proposed a new statistic to assess market dominance. In this comment we expand their discussion of certain mathematical properties in their analysis and link their methodology to some previous approaches.
    Keywords: Firm’s dominance; Dominant position; Measure of dominance
    JEL: K21 L11 L41
    Date: 2010–01
  2. By: Kristoffel Grechenig (Max Planck Institute for Research on Collective Goods, Bonn); Michael Sekyra (Vienna University of Technology, Austria)
    Abstract: We address one of the cardinal puzzles of European corporate law: the lack of derivate share-holder suits. We explain this phenomenon on the basis of percentage limits which require share-holders to hold a minimum amount of shares in order to bring a lawsuit. We show that, under this legal regime, managers will collude with large shareholders by means of settlements or bribes that impose a negative externality on small shareholders. Contrary to conventional agency models, we find that large shareholders do not monitor the management; as a consequence, there is no free riding opportunity for small shareholders.
    Keywords: Collusion, Derivative Shareholder Suits, Percentage Limits, Monitoring, Free Riding
    JEL: K22 K42 G30
    Date: 2010–05
  3. By: Stephan Dickert (Max Planck Institute for Research on Collective Goods, Bonn); Britta Herbig (Institute for Occupational, Social and Environmental Medicine, Ludwig-Maximilians-University, Munich, Germany); Andreas Glöckner (Max Planck Institute for Research on Collective Goods, Bonn); Christina Gansen (University of Bonn); Roman Portack (University of Bonn)
    Abstract: In an experimental study we investigated effects of information amount and legal training on the judgment accuracy in legal cases. In a two (legal training: yes vs. no) x two (information amount: high vs. low) between-subjects design, 90 participants judged the premeditation of a perpetrator in eight real-world cases decided by the German Federal Court of Justice. Judgment accuracy was assessed in comparison with the Court’s ruling. Legal training increased judgment accuracy, but did not depend on the amount of information given. Furthermore, legal training corresponded with higher confidence. Interestingly, emotional reactions to the legal cases were stronger when more information was given for individuals without legal training but decreased for individuals with training. This interaction seems to be caused by fundamental differences in the way people construct their mental representations of the cases. We advance an information processing perspective to explain the observed differences in legal judgments and conclude with a discussion on the merits and problems of offering more information to lay people participating in legal decision making.
    Date: 2010–08
  4. By: Susanne Prantl (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: What is the impact of firm entry regulation on sustained entry into self-employment? How does firm entry regulation influence the performance of long-living entrants? In this paper, I address these questions by exploiting a natural experiment in firm entry regulation. After German reunification, East and West Germany faced different economic conditions, but fell under the same law that imposes a substantial mandatory standard on entrepreneurs who want to start a legally independent firm in one of the regulated occupations. The empirical results suggest that the entry regulation suppresses long-living entrants, not only entrants in general or transient, short-lived entrants. This effect on the number of long-living entrants is not accompanied by a counteracting effect on the performance of long-living entrants, as measured by firm size several years after entry.
    Keywords: Firm entry regulation, sustained entry, self-employment, firm size
    JEL: K20 L25 L26 L50 M13 P52
    Date: 2010–07

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