New Economics Papers
on Law and Economics
Issue of 2011‒07‒21
three papers chosen by
Jeong-Joon Lee, Towson University

  1. Are "Gangstas" Peacocks? The Handicap Principle and Illicit Markets By Andrew Mell
  2. Standardized Enforcement: Access to Justice vs Contractual Innovation By Gennaioli, Nicola; Perotti, Enrico C
  3. Does Europe have an innovation policy? The case of EU economic law By Battaglia, Lauren; Larouche, Pierre; Negrinotti, Matteo

  1. By: Andrew Mell
    Abstract: Criminals who wear gang colors are acting in a surprisingly brazen way which must increase the probability of being caught and punished by the police. In our model this brazen behavior is a solution to an enforcement problem. The central idea is that less able criminals see lower gains from continued participation in crime because they will be caught and punished more often. Lower future gains imply that reputational concerns will be less effective at enforcing honesty. Only dealing with brazen criminals will become a good way to avoid dealing with incompetent criminals, because they cannot afford to mimic the brazen behavior. The principle is similar to the selection for a handicap in evolutionary biology.
    Keywords: Illegal behavior and the enforcement of law, Information, Uncertainty
    JEL: K42 D80
    Date: 2011
  2. By: Gennaioli, Nicola; Perotti, Enrico C
    Abstract: We model the different ways in which precedents and contract standardization shape the joint development of markets and the law. In a setting where more resourceful parties can distort contract enforcement, we find that the introduction of standard contracts reduces enforcement distortions relative to precedents, exerting two effects: i) it statically expands the volume of trade, but ii) it hampers commercial and legal innovation by crowding out the use of innovative contracts. We offer a rationale for the large scale commercial codification that occurred in Common Law systems in the XIX century during a period of booming commerce and long distance trade.
    Keywords: imperfect judicial enforcement; optimal contracts
    JEL: K00
    Date: 2011–07
  3. By: Battaglia, Lauren; Larouche, Pierre; Negrinotti, Matteo
    Abstract: This paper is the first of a larger project aimed at exploring, among other things, whether Europe has a consistent innovation policy in the context of EU economic law (competition policy, intellectual property law, sector regulation). As such, its primary aim is to present our approach for answering this question and outline the anticipated contributions of the project. Part I of the paper sets forth the theoretical foundations of the project--namely an integrated approach to economic law that moves beyond apparent conflicts and assumes innovation as the starting point. Taking this as the foundation, the two primary components of the project are described. First, a theoretical component involving the development of an analytical grid to be used to identify ways in which economic law impacts innovation, and second an applied component that explores observable instances where choices, both implicit and explicit, are made regarding innovation in economic law. Part II of the paper builds on this and offers a preliminary illustration of the proposed analysis in the context of pharmaceuticals, specifically drug reformulation regulatory gaming.
    Keywords: antitrust; economic law; innovation; pharmaceuticals
    JEL: K21 L41 O31 O34 O38
    Date: 2011–07

This issue is ©2011 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.
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