New Economics Papers
on Law and Economics
Issue of 2012‒12‒10
four papers chosen by
Jeong-Joon Lee, Towson University

  1. Innovation, tort law, and competition By Baumann, Florian; Heine, Klaus
  2. The Creation of Transnational Law - Participatory Legitimacy of Privately Created Norms By Andreas Maurer
  3. The Effect of Additional Police Force on Crime Rate:Evidence from Women's Japan Basketball League By Hiroya Kawashima
  4. The Transnationalisation of Commercial Law By Gralf-Peter Calliess; Hermann Hoffmann; Jens Mertens

  1. By: Baumann, Florian; Heine, Klaus
    Abstract: In this paper, we examine the link between innovative activity on the part of firms, the competitive pressure to introduce innovations and optimal damages awards. While innovative activity brings forth valuable new products for consumers, competitive pressure in the ensuing innovation race induces firms to launch innovations too early, thereby raising the likelihood of severe product risks above the optimal failure rate. Introducing innovations too early may call for the application of punitive damages instead of mere compensation of harm caused, in order to decelerate such welfare-reducing innovation races. The optimal tort system is accordingly highly dependent not only on the expected profits and the effectiveness of time delays with respect to reducing expected harm, but also on the competitive environment in which firms operate. --
    Keywords: competition,innovation,punitive damages,tort law
    JEL: K13 L13 O31
    Date: 2012
  2. By: Andreas Maurer (University of Bremen - Faculty of Law)
    Abstract: The notion of a transnational law has been under dispute for several decades. After Philip Jessup in his widely-known Storrs Lecture on Jurisprudence at the Yale Law School had coined the phrase in 1956, it has been used in numerous contexts. One of the most influential narratives of transnational law is the one that equates transnational law with a "New Law Merchant". In this context, transnational rules are seen as a source of law for cross border trade law which exists as a third form of law besides national and international law. It is created by arbitrators but also by internationally acting private rule- and standard-setting organizations such as the international chamber of commerce (ICC), that creates and administers standard terms such as the International Commercial Terms (INCOTERMS) or the Uniform Customs and Practice for documentary credits (UCP). There are a number of organization which Ð just like the ICC Ð create rules and standards that in some cases are more important for cross-border trade than national or international laws. Legal scholarship, however, has always faced problems conceptualizing such rules and standards. Whereas many legal scholars have tried to explain "private lawmaking" in different ways, others have just rejected the possibility of privately created law at all. Adherents of a theory of transnational law claim that privately created norms have the same effects of law and therefore are "functional equivalents" (Luhmann) of law. Critics of the concept of transnational law, however, have always pointed out differences between state law and transnational law. Especially the lack of (democratic) legitimization of transnational law has been a focal point of severe critique. I will elaborate on the observation that participation seems to play an important role in the creation of transnational law. I will also argue that participation can be a source of legitimacy and normativity in the realm of transnational lawmaking. My thesis is that privately created norms in the transnational field can be as normative as national law if those who will be affected by a norm have the opportunity to participate in the process of its formation.
    Keywords: transnational law, contract law, standard contract terms, standard clauses, maritime law, maritime industry, legal theory, international law, global law, globalization
    JEL: K12 K40 K49 N40
    Date: 2012–11
  3. By: Hiroya Kawashima (Ph.D. student, Osaka School of International Public Policy (OSIPP))
    Abstract: This paper analyzes influence of an additional referee on number of fouls by using the data from Women's Japan Basketball League (WJBL) in order to examine whether number of police officers affects the crime rate. For the season of 2010-2011, the upper league of the WJBL introduced 3 referees system for the adaption of the international standard. Using this natural experiment, the Difference in Difference and the Instrumental Variable method are used to remove endogeneity. The results indicate that increased number of referees decrease number of fouls after considering both reverse causality and unobservable heterogeneity.
    Keywords: Police, Crime, Basketball
    JEL: D0 K0
    Date: 2012–11
  4. By: Gralf-Peter Calliess (University of Bremen - Faculty of Law & ZenTra); Hermann Hoffmann (University of Bremen - Faculty of Law & ZenTra); Jens Mertens (University of Bremen - Faculty of Law)
    Abstract: Commerce always requires an institutional embedment. Basically, private Institutions as well as state institutions can provide the normative good of legal certainty understood as the enforceability of contractual commitments. While for domestic commerce, the balance between the importance of private and state institutions is almost equal, economic globalization leads to a decrease in the relative weight of public institutions and to a corresponding increase in the overall importance of private institutions for international commerce. This trend of internationalization and privatization of responsibility for the provision of legal certainty combine to what we call the transnationalisation of commercial law. Drawing on five case studies, in this paper we try to explain why today private institutions are of greater importance for cross-border transactions than state or multinational institutions. One the one hand, the first two studies show that there is no real practical need for multinational institutions for cross-border commerce. First, the modern information and communication technology strengthen the effectiveness of reputation-based mechanisms - relational contracts and reputational networks - for the safeguarding of cross-border transactions. Second, vertical integration in general and intra-firm trade in particular offer effective alternatives to market exchange. One the other hand, some private institutions can offer more than safeguarding commercial transactions as they can guarantee to a certain extent a respect of fairness and public policy issues. In maritime law, the third case study, it can be shown that private actors can achieve a fair arrangement for all stakeholders by allowing them to participate in the process of norm-formation in a transparent process. The fourth study in international commercial arbitration shows that international arbitration courts respect national mandatory rules and produce new transnational mandatory rules. However, the transnationalisation of commercial law leads to the trend of the vanishing trial: National Courts register less commercial disputes which does not come without cost. The fifth case study explains possible reasons for the decreasing number of commercial cases in German courts.
    Keywords: Transnational Law, cross-border commercial transactions, global trade, international private law, conflict of laws, contract enforcement, economic constitution, private ordering, public policy, international arbitration, cross-border contracts, national courts, judicial services, vanishing trial
    JEL: A14 B15 F14 F15 F23 K12 K41 K42 L22 L14
    Date: 2012–11

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