New Economics Papers
on Law and Economics
Issue of 2014‒04‒18
eight papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Loss-sharing between Nonnegligent Parties. By Giuseppe Dari-Mattiacci; Bruno Lovat; Francesco Parisi
  2. Are Cartel Fines Optimal? Theory and Evidence from the European Union By Marie-Laure Allain; Marcel Boyer; Rachidi Kotchoni; Jean-Pierre Ponssard
  3. Criminality spread: a "Boomerang effect" of public transport improvements? By Carlos Augusto Olarte Bacares
  4. Corporate Ownership and Control in Victorian Britain By Acheson, Graeme; Campbell, Gareth; Turner, John D.; Vanteeva, Nadia
  5. Regulating gasoline retail markets: The case of Germany By Wittmann, Nadine
  6. The Divergent Effects of Long-Term and Short-Term Entry Investments on Home Market Cartels By Daniel Cracau; Abdolkarim Sadrieh
  7. Violation of environmental regulations as a disinvestment in social capital By Gren, Ing-Marie; Andersson Franko, Mikael; Holstein, Fredrik
  8. Where Has the Currency Gone? And Why? The Underground Economy and Personal Income Tax Evasion in the U.S., 1970-2008 By Cebula, Richard

  1. By: Giuseppe Dari-Mattiacci; Bruno Lovat; Francesco Parisi
    Abstract: Shavell (1980) established that all existing tort regimes fail to incentivize optimal activity levels. The bearer of residual loss adopts a socially optimal activity level, however the non-bearer of residual loss will adopt an excessive level of activity. In this paper, we explore alternative liability rules, which distribute the cost of accidents between non-negligent parties, effectively rendering both parties (injurer and victim) partial residual bearers of loss. We introduce a bilateral accident model with care and activity levels, assuming risk neutrality. We determine conditions where loss-sharing for nonnegligent torts may be a desirable alternative for policymakers, and analyze the social cost of accidents under such shared-liability regimes. We also extend our analysis to account for role-uncertainty of the parties, as well as real-world implications for tort law.
    Keywords: tort, loss-sharing, negligence, strict liability, comparative fault, role-uncertainty.
    JEL: K13 K32
    Date: 2014
  2. By: Marie-Laure Allain; Marcel Boyer; Rachidi Kotchoni; Jean-Pierre Ponssard
    Abstract: Deterring the formation or continuation of cartels is a major objective of antitrust policy. We develop a dynamic framework to characterize the compensation and deterrence properties of fines, based on the fact that cartel stability depends on the ability to prevent deviation, which itself depends in part on fines imposed in case of detection and conviction. We show that the proper consideration of cartel dynamics plays a major role in determining optimal deterrent fines. Our results suggest that a majority of fines imposed by the European Commission in recent years meet the deterrence objective. Dissuader la formation ou le maintien des cartels est un objectif important de la politique antitrust. Nous développons un cadre analytique dynamique pour caractériser le niveau de dissuasion des amendes et indemnisation, fondé sur le fait que la stabilité d’un cartel dépend de la capacité à prévenir les déviations, qui elle-même dépend en partie des amendes infligées en cas de détection et de conviction. Nous montrons que la prise en compte appropriée de la dynamique des cartels joue un rôle clé dans la détermination du niveau des amendes optimales. Nos résultats suggèrent que les amendes imposées par la Commission Européenne au cours des dernières années sont dissuasives, du moins en majorité
    Keywords: Cartels, fines, antitrust policy, Cartels, amendes, politique antitrust, concurrence
    JEL: L13 L41 L42
    Date: 2013–07–01
  3. By: Carlos Augusto Olarte Bacares (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne)
    Abstract: The relationship between accessibility or the degree of improvement of urban transport and criminality has been underestimated and close to forgotten. This paper aims to reveal the importance of public transport policies in the evolution of crime configuration in a city. The hypothesis that the probability of transport improvements in a zone depends on some of its socio-economic characteristics is adopted. The use of the propensity score matching technique reveals that the presence of improvements of public transport in a zone of the city has a direct and significant impact on the increase of some types of crime. Likewise, spatial econometrics results expose that crime tends to be contagious in neighbouring zones. The presence of the Transmilenio system in Bogota may share out criminality to other zones of the city. Negative externalities like the better mobility of offenders and, then, their possible choice to expand their criminal activities to new zones, can spoil the positive effects of enhancement of public transport. Far from suggesting no developing public transport or isolating some "dangerous" neighbourhoods or inhabitants, this article shows that improvement of public transport may not only generate positive externalities; policy makers should take into consideration the mutation and shift of criminal behaviours in order to identify possible solutions such as the construction of more establishments providing health, welfare and sporting activities, as is evoked in the results. In this way, the "boomerang effect" of the improvement to transport will be reduced.
    Keywords: Urban public transports improvements; propensity score matching; crime contagion; spatial dependence
    Date: 2014–03
  4. By: Acheson, Graeme; Campbell, Gareth; Turner, John D.; Vanteeva, Nadia
    Abstract: Using ownership and control data for 890 firm-years, this paper examines the concentration of capital and voting rights in British companies in the second half of the nineteenth century. We find that both capital and voting rights were diffuse by modern-day standards. This implies that ownership was separated from control in the UK much earlier than previously thought, and given that it occurred in an era with weak shareholder protection law, it undermines the influential law and finance hypothesis. We also find that diffuse ownership is correlated with large boards, a London head office, non-linear voting rights, and shares traded on multiple markets. --
    Keywords: Corporate ownership and control,Law and finance hypothesis,British financial history,Shareholder protection law
    JEL: G32 K22 N24
    Date: 2014
  5. By: Wittmann, Nadine
    Abstract: In 2011, price peaks in retail gasoline prices caused public outrage and attracted the attention of German regulatory agencies. After having examined the market, competition authorities concluded that tacit collusion existed but could not easily be prosecuted under the given competition law. In several other countries, various types of regulatory schemes are implemented to tackle tacit collusive behavior. E.g. there are price ceilings established in Luxembourg or per day limits of price increases given in Austria. However, research has found that none of them has led to satisfactory results. Hence, the following paper proposes a different regulatory approach, i.e. the implementation of corrective taxes. Results show that a special type of variable tax scheme successfully manages to render collusion an unprofitable business. In addition, it is also easy to levy and monitor. Thereby, the inherent vice of the gasoline retail market, i.e. the transparency that enables tacit - and therefore non-prosecutable - collusion, could be turned into a regulatory virtue as it becomes a powerful means to help successfully tackle imperfect competition and to bring about a more efficient market outcome. --
    Keywords: gasoline retail market,regulation,market structure and antitrust,collusion
    JEL: Q48 D42 D43
    Date: 2014
  6. By: Daniel Cracau (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Abdolkarim Sadrieh (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: Positive effects of multimarket activities on cooperation between firms are widely acknowledged. We study these effects in a setting with home market asymmetries as is typical for global competition. In our multimarket duopoly experiment each firm has a home market but may also enter the other firm's market. Without entry barriers, we observe a high level of mutual forbearance with firms serving their home markets exclusively. With short-term entry barriers, the competition rates decrease significantly, as expected. Surprisingly, with long-term entry barriers, firms exhibit higher levels of competition, entering each other's market more often. We conjecture that in the latter case, bearing the cost of entry is perceived as a signal for the intention to compete and has an adverse effect on cooperation.
    Keywords: Market Entry Barriers, Mutual Forbearance, Prisoner's Dilemma, Experimental Economics
    JEL: D4 L1
    Date: 2014–04
  7. By: Gren, Ing-Marie (Department of Economics, Swedish University of Agricultural Sciences); Andersson Franko, Mikael (Department of Economics, Swedish University of Agricultural Sciences); Holstein, Fredrik (Department of Economics, Swedish University of Agricultural Sciences)
    Abstract: This paper developed a simple dynamic model in order to analyse the impact of social capital on violation of environmental regulations. Two main channels of influence were identified; through informal enforcement of regulations and through effects on costs from disinvestment in social capital caused by violation. The model was tested using survey data on enforcement and violation of command and control regulations at municipalities and counties in Sweden. Four different measures on the social capital variable were used; general trust, trust in local and national governments, and organizational activity. Count data models were used for estimating the explanatory power of these variables in relation to inspection frequency and control variables of community characteristics. Statistically best results were obtained for organizational activity for all firm categories. The results showed that both the level of this social capital measure and its growth over time curb violation.
    Keywords: social capital; violation of environmental regulations; econometric test; count data model; Sweden
    JEL: K33 K42 Q58
    Date: 2014–04–09
  8. By: Cebula, Richard
    Abstract: Unaccounted for currency in the U.S. is argued to reflect the presence of widespread income tax evasion. This empirical study seeks to identify determinants of the underground economy in the U.S. in the form of federal personal income tax evasion over the period 1970-2008. In this study, we use the most recent data available on personal income tax evasion, data that are derived from the General Currency Ratio Model and measured in the form of the ratio of unreported AGI (adjusted gross income) to reported AGI. Other studies of federal income tax evasion for the U.S. are dated and do not use data this current. It is found that personal income tax evasion was an increasing function of the maximum marginal federal personal income tax rate, the percentage of federal personal income tax returns characterized by itemized deductions, and unpopular military engagements, in this case, the War in Iraq, and a decreasing function of the Tax Reform Act of 1986 (during its first two years of being implemented), the ratio of the tax free interest rate yield on high grade municipals to the interest rate yield on ten year Treasury notes (as a measure of the incentive effect of a better return to tax avoidance, which is legal), and higher audit rates of filed federal income tax returns (as a measure of risk from tax evasion) by IRS personnel.
    Keywords: underground economy; tax evasion; tax rates; audit rates
    JEL: H24 H26 H31 K42
    Date: 2014–04–12

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