New Economics Papers
on Law and Economics
Issue of 2010‒10‒02
four papers chosen by
Jeong-Joon Lee, Towson University

  1. Prosecution and Leniency Programs: a Fool's Game By Sauvagnat, Julien
  2. Leniency programs for multimarket firms: The effect of Amnesty Plus on cartel formation By LEFOUILI, Yassine; ROUX, Catherine
  3. Risky Activities and Strict Liability Rules: Delegating Safety By Gérard Mondello
  4. Using the Law to Change the Custom By Gani Aldashev; Imane Chaara; Jean-Philippe Platteau; Zaki Wahhaj

  1. By: Sauvagnat, Julien
    Abstract: We present a model where the Antitrust Authority is privately informed about the strength of the case against a given cartel. In this context, the Antitrust Authority may obtain cartel members' confessions even when it opens an investigation knowing that it has no chance to find hard evidence. More generally, we show that offering leniency allows to raise the conviction rate, which in turn enhances cartel desistance and cartel deterrence. A second contribution of the paper is to show that the optimal leniency scheme involves a single informant rule. That is, amnesty should be given only if a unique cartel member reports information.
    Keywords: Antitrust law and policy; Cartels; Collusion; Self-reporting
    JEL: K21 K42 L41
    Date: 2010–09–16
  2. By: LEFOUILI, Yassine (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium); ROUX, Catherine (University of Lausanne, Faculty of Business and Economics, CH-1015 Lausanne-Dorigny, Switzerland)
    Abstract: We examine the effect of the Amnesty Plus policy on the incentives of firms to engage in cartel activities. Amnesty Plus is aimed at attracting amnesty applications by encouraging firms, convicted in one market, to report their collusive agreements in other markets. It has been vigorously advertised that Amnesty Plus weakens cartel stability. We show to the contrary that Amnesty Plus may not have this desirable effect, and, if improperly designed, may even stabilize a cartel. We suggest a simple discount-setting rule to avoid this anticompetitive effect.
    Keywords: Amnesty Plus, Leniency program, multimarket contact, antitrust policy
    JEL: K21 K42 L41
    Date: 2010–05–01
  3. By: Gérard Mondello (University of Nice Sophia Antipolis, CREDECO, GREDEG, UMR 6727, CNRS)
    Abstract: This paper studies the delegation of activities that pose serious risks to health and the environment in an economy regulated by strict liability schemes. Strict liability induces judgment-proof possibilities. Two civil liability regimes are then compared: a strict liability scheme and a capped strict liability one. The argument is led under a twofold asymmetric information assumption between the principal and the agent: the efficiency level in effort for safety and the agent’s level of wealth. The paper shows that standard strict liability under information asymmetries deters the efficient agent to compete and favors adverse selection. Then, under conditions, a capped strict liability regime is a better regime than a standard strict liability one because it induces the efficient agent to supply the level of safety effort equivalent to the first best solution. The counterpart is the perception of an informational rent by the efficient agent. At the optimum, this rent is minimized by the efficient contract supplied by the principal.
    Keywords: Environment, Strict Liability, Ex-Ante Regulation, Ex-Post Liability, Judgment-Proof, Environment Law, CERCLA, Environmental Liability
    JEL: K0 K32 Q01 Q58
    Date: 2010–09
  4. By: Gani Aldashev (University of Namur and CRED); Imane Chaara (University of Namur and CRED); Jean-Philippe Platteau (University of Namur and CRED); Zaki Wahhaj (University of Namur and CRED)
    Abstract: We build a simple model of legal dualism in which a pro-poor legal reform, under certain conditions, causes the conflicting custom to go some way toward producing the change intended by the legislator. It then acts as an "outside anchor" that exerts a "magnet effect" on the custom. We illustrate this insight using examples on inheritance, marriage, and divorce issues in Sub-Saharan Africa and India. We also characterize the conditions under which a moderate pro-poor reform is more effective than a radical reform.
    Keywords: Custom, Statutory Law, Inequality, Legal Reform
    JEL: K40 O17 D74
    Date: 2010–05

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