New Economics Papers
on Law and Economics
Issue of 2012‒06‒13
four papers chosen by
Jeong-Joon Lee, Towson University

  1. A Note on Upward Pricing Pressure:The possibility of false positives. By Mathiesen, Lars; Nilsen, Øivind Anti; Sørgard, Lars
  2. Corruption By Banerjee, Abhijit; Hanna, Rema; Mullainathan, Sendhil
  3. Who is Selling You Chiquilitros of Gasoline? Evidence From a Public Disclosure Policy By Santiago Guerrero
  4. Sovereign debt crises and financial bailouts: the anatomy and components of an everlasting relationship (I) By Ojo, Marianne

  1. By: Mathiesen, Lars (Dept. of Economics, Norwegian School of Economics and Business Administration); Nilsen, Øivind Anti (Dept. of Economics, Norwegian School of Economics and Business Administration); Sørgard, Lars (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: Farrell and Shapiro proposed a simple test of the possible upward pricing pressure (UPP) following a merger. They showed that the test may give false negatives, that is, indicate that a merger may not give an UPP, while a more comprehensive test would indicate the opposite. We show that their test applied to a case with asymmetric firms may give false positives.
    Keywords: Unilateral merger effects; post-merger price effects.
    JEL: K21 L41
    Date: 2012–05–08
  2. By: Banerjee, Abhijit (MIT); Hanna, Rema (Harvard University); Mullainathan, Sendhil (Harvard University)
    Abstract: In this paper, we provide a new framework for analyzing corruption in public bureaucracies. The standard way to model corruption is as an example of moral hazard, which then leads to a focus on better monitoring and stricter penalties with the eradication of corruption as the final goal. We propose an alternative approach which emphasizes why corruption arises in the first place. Corruption is modeled as a consequence of the interaction between the underlying task being performed by bureaucrat, the bureaucrat's private incentives and what the principal can observe and control. This allows us to study not just corruption but also other distortions that arise simultaneously with corruption, such as red-tape and ultimately, the quality and efficiency of the public services provided, and how these outcomes vary depending on the specific features of this task. We then review the growing empirical literature on corruption through this perspective and provide guidance for future empirical research.
    Date: 2012–05
  3. By: Santiago Guerrero
    Abstract: This paper estimates the impacts of disclosing information online and through the newspapers of gas stations that violate fuel supplying standards in Mexico. Using data from inspection histories, it finds that disclosing information online decreases the probability that any gas station would be found in violation in subsequent periods. Gas stations exposed in the newspapers are estimated to decrease their sales at the month of the newspaper publication. This effect fades with time and is not significant for subsequent months. The paper shows that public disclosure mechanisms can complement enforcement effort in contexts where institutions are weak.
    Keywords: Public disclosure, Corruption, Enforcement, Inspections, Violations.
    JEL: K42 K32 L51
    Date: 2012–05
  4. By: Ojo, Marianne
    Abstract: This paper highlights why financial bailouts are an inevitable and necessary element in global efforts aimed at ensuring that financial stability is sustained. How could such bailouts be conducted in such a way that moral hazard does not become a too frequent, ever recurring issue? Systemic risks constitute a crucial reason for the need to avoid global instability. Adequately and promptly responding to “too big to fail” institutions and nations also constitutes a crucial component of the need to avoid and contain the spread of systemic risks.
    Keywords: systemic risks; financial regulation; sovereign debts; bailouts; moral hazard; supervision; monetary; fiscal policies; IMF; monetary unions; regional unions; ECB
    JEL: K2 E5 E6 D00 G01
    Date: 2012–06–02

This issue is ©2012 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.