New Economics Papers
on Law and Economics
Issue of 2011‒05‒24
seven papers chosen by
Jeong-Joon Lee, Towson University

  1. Antitrust Law and the Promotion of Democracy and Economic Growth By Niels Petersen
  2. Enforcing IPR through Informal Institutions: The possible role of religion in fighting software piracy By Nora Elbialy; Moamen Gouda
  3. Tempting Righteous Citizens? On the Counterintuitive Effects of Increasing Sanctions By Tim Friehe
  4. On the institutional innovation process : EU regulation through an evolutionary lens By Evita Paraskevopoulou
  5. Bargaining Power in Relational Contracts:An Experimental Study By Cordero Salas, Paula
  6. Personal Bankruptcy Law, Fresh Starts, and Judicial Practice By Régis Blazy; Bertrand Chopard; Eric Langlais; Ydriss Ziane
  7. Does Accuracy Improve the Information Value of Trials? By Anup Malani; Scott A. Baker

  1. By: Niels Petersen (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: There is a considerable debate in the legal literature about the purpose of antitrust institutions. Some argue that antitrust law merely serves the purpose of economic growth, while others have a broader perspective on the function of antitrust, maintaining that the prevention of economic concentration is an important means to promote democratization and democratic stability. This contribution seeks to test the empirical assumptions of this normative debate. Using panel data of 154 states from 1960 to 2007, it analyzes whether antitrust law actually has a positive effect on democracy and economic growth. The paper finds that antitrust law has a strongly positive effect on the level of GDP per capita and economic growth. However, there is no significant positive effect on the level of democracy. It is suggested that these results might be due to the current structure of existing antitrust laws, which are designed to promote economic efficiency rather than to prevent economic concentration.
    Date: 2011–01
  2. By: Nora Elbialy (University of Hamburg); Moamen Gouda (University of Marburg)
    Abstract: The existence of formal IPR laws can be considered a prerequisite for having efficient law enforcement but does not imply efficient enforcement in itself. A simple model is constructed to explain the interplay between the IPR law and human behavior within counterfeiting countries. It shows how a politically monitored IPR enforcement strategy is able to alter formal IPR laws or institutions but might not affect informal institutions, or human morals and behavior, to the same extent, hence barely affecting piracy situation. The model shows the essential role of informal institutions and its sanction mechanisms in the enforcement process. The main obstacle of IPR enforcement is that people are still not convinced that IPR violations are unethical. Religion can be considered an informal institution that might support or hinder formal laws issued with regards to IPR and hence influence de facto enforcement of laws, especially in countries with high piracy rate if a high adherence to religion is found. As the Religion-Loyalty Index (RLI) developed by this study shows, Muslim countries have the highest religiosity level among different religions. Consequently, an investigation of how Islamic jurisprudence views IPR piracy is conducted. As Islam generally prohibits IPR piracy, a set of policy recommendations based on new institutional perspective is presented that can effectively help in minimizing IPR piracy in developing countries in general and Muslim ones in specific.
    Keywords: Intellectual Property Rights (IPR), Formal vs. Informal Institutions, New Institutional Economics (NIE), Software Piracy, Religion, Enforcement
    JEL: K39 K42 L86 Z12
    Date: 2011
  3. By: Tim Friehe (Department of Economics, University of Konstanz, Germany)
    Abstract: This paper demonstrates that increasing the expected sanctions for a crime may increase this crime's prevalence, using a principal-agent model with different crimes. The intuition is that the policy change may increase the principal's expected payoff from crime by decreasing the information rent required by the agent.
    Keywords: Crime, principal-agent relation, information rent
    JEL: K42 H23
    Date: 2011–05–05
  4. By: Evita Paraskevopoulou
    Abstract: The focal point of this paper is the study of the process of emergence of novel institutions and the identification of factors that may influence the outcome of this process. We view inst accepted sets of rules that influence We consider regulations as endogenously emerging institutions that evolve in accordance to other socioeconomic factors and analyze the regulatory process at each of its stages adopting an evolutionary approach. Evidence shows that the regulatory process resembles the innovation process as it can be viewed as a process of knowledge accumulation and transmission that is facilitate empirically contextualized in the European political system, the detergents industry and specific regulations formed at European level. Data is drawn by secondary resour of public and private stakeholders participating in the process
    Keywords: Evolutionary theory, Institutions, Regulation, Policy
    JEL: K20 L50 L65 O25 O43
    Date: 2011–04
  5. By: Cordero Salas, Paula
    Abstract: This paper provides experimental evidence of the economic impact from shifting bargaining power in relational contracts. I implement an experimental design that adjusts the bargaining power of sellers (agents) and the enforceability of the contract. I find that the vast majority of contracts take the form of efficiency wage contracts instead of contingent performance contracts when enforcement is partially incomplete and sellers have more bargaining power than buyers. The total contracted and actual compensation increase with the bargaining power of the sellers. However, sellers' prots are found to increase only if a part of the total payment is third-party enforceable. In this case, observed surplus and efficiency are lower than predictions. When no part of a contract is third-party enforceable, more cooperative relationships emerge, exhibiting higher quality provision resulting in higher surplus and efficiency while rent sharing is lower. The result is explained by the stronger buyer's deviation, confirming predictions derived in Cordero Salas (2010). The results here provide insight into the economic consequences of enacting policies that improve the bargaining conditions of weaker parties in market settings relying on self-enforcement from underdeveloped legal institutions.
    Keywords: contracts, incomplete enforcement, bargaining, experiments, distribution, institutions, Industrial Organization, Institutional and Behavioral Economics, International Development, D86, K12, L14, O12, Q13,
    Date: 2011
  6. By: Régis Blazy; Bertrand Chopard; Eric Langlais; Ydriss Ziane
    Abstract: We explore the ways French judges respond to the possibility of discharging personal debts in exchange for liquidation of debtors’ assets. We present empirical results on the determinants of judicial selection between debtors whose debts are wiped out and those who have to reimburse them. We find that French judges tend to disqualify debtors with multiple creditors from debt discharge, and are sensitive to regional labor market conditions. These empirical results help us understand better how French personal bankruptcy laws perform compared to other national systems. Finally, our results serve to fill the gap between bankruptcy rules and judicial practice.
    Keywords: Personal bankruptcy, over-indebtedness
    JEL: G33 K29
    Date: 2011
  7. By: Anup Malani; Scott A. Baker
    Abstract: We develop a model where products liability trials provide information to consumers who are not parties to the litigation. Consumers use this information to take precautions against dangerous products. A critical assumption is that consumers cannot differentiate between firms that have never been sued and firms that have been sued but settled out of court. In this framework, we show that perfectly accurate courts do not maximize information to consumers and thus welfare, contrary to Kaplow and Shavell (1994). More accurate courts provide more information only if producers go to trial. Greater accuracy, however, encourages producers of dangerous products to settle and hide their type. When courts are perfectly accurate, all low quality producers settle. And given the lack of any information from trials about bad types, consumers (rationally) fail to take precautions. If consumer precautions are relatively more efficient than producer precautions, our conclusion stands even when firms can invest in improving the safety of their products.
    JEL: K10 K40
    Date: 2011–05

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