New Economics Papers
on Law and Economics
Issue of 2014‒04‒29
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The Essential Facilities Doctrine: The Lost Message of Terminal Railroad By Maurer, Stephen M.; Scotchmer, Suzanne
  2. Russian Competition Law In Light Of The Principles Of Ex Post And Ex Ante By Konstantin Yu. Totyev
  3. Competition Law Enforcement in Malaysia: Some Recent Developments By Cassey LEE
  4. Effects Of Hostility Tradition In Antitrust: Leniency Programs And Cooperation Agreements By Natalia Pavlova; Andrey Shastitko
  5. Cartel Detection and Collusion Screening: An Empirical Analysis of the London Metal Exchange By Samà, Danilo
  6. Crime and Self-Control Revisited: Disentangling the Effect of Self-Control on Risk and Social Preferences By Friehe, Tim; Schildberg-Hörisch, Hannah
  7. Property in Print: Copyright Law and the American Magazine Industry By Haveman, Heather A.; Kluttz, Daniel N.
  8. Levers of Corporate Governance in India: Critical Analysis through Prism of Legal Framework By Sapovadia, Vrajlal; Patel, Akash
  9. The Effectiveness of Competition Policy: An Econometric Assessment in Developed and Developing Countries By Samà, Danilo
  10. The Differential Effects of Law, Culture and Political Risk on Fees, Performance and Risk-Taking Behavior of Islamic and Conventional Funds By Mehri, Meryem
  11. Public Order and Private Payments: Paying for Police Services at Events By Nyberg, Sten; Priks, Mikael

  1. By: Maurer, Stephen M.; Scotchmer, Suzanne
    Abstract: The growing importance of shared networks, shared platforms and shared standards leads to a renewed discussion of the essential facilities doctrine of antitrust. This is an area where European law and American law have diverged. In Trinko (2007), the U.S. Supreme Court came close to abolishing it. At the same time, it was reinvigorated by the European Commission, which asserted it successfully in E.C. v. Microsoft, and then, facing criticism, clarified the doctrine in a Guidance document. We harmonize the main cases around the doctrine’s original but often forgotten purpose namely, harvesting economic synergies through sharing. We argue that, absent such a doctrine, these synergies could be lost as firms either avoid sharing to avoid antitrust liability, or create sharing arrangements that undermine competition. We show how and why the original purpose of the doctrine has become entangled with other antitrust issues, in particular, leveraging. We systematize the sharing rules that have been imposed or allowed, with an emphasis on how to harvest synergies while mitigating any harm to competition.
    Keywords: Competitions policy, antitrust, Sherman Act, essential facility
    JEL: K21 L40 L41
    Date: 2014–03–10
  2. By: Konstantin Yu. Totyev (National Research University Higher School of Economics)
    Abstract: This article is devoted to the legitimation and application of the standards of ex post and ex ante by courts and the executive authorities in the sphere of competition regulation. The postulates of ex post and ex ante are considered as legal principles. The principle of ex post is intended solely for judicial and administrative application; it has a deontological framework; it assumes that the legality of the activity of economic entities is assessed only on the basis of positive legal criteria in terms of the subjective rights violated; it is limited to a particular case. The traditional approach to the principle of ex post limits the scope of its application on the subjects and excessively expands its objects. The postulate of ex ante has a utilitarian basis which assumes the assessment of the application of relevant rules in the future. One of the main aims of the article is to refute the common view of lawyers and economists that a legislator applies principle of ex ante not being bound by principle of ex post, while it is the other way around for the courts and the executive authorities. The principle of ex ante may be applied not only in the process of the creation of new rules but also at the application stage for existing rules on economic competition. This is justified because the arguments of the courts and the executive authorities about a refusal to take into account the consequences of a decision in a particular case are not convincing.
    Keywords: antitrust law; competition; competition law; principles of ex post and ex ante; rights belonging to a person (legal rights); micro-level and macro-level consequences.
    JEL: K21
    Date: 2014
  3. By: Cassey LEE (University of Wollongong)
    Abstract: The enactment of the Competition Act 2010 represents a significant progress in the implementation of competition policy in Malaysia. The Malaysian Competition Commission has been fairly successful in its enforcement activities especially in price fixing cases involving trade associations. It has also investigated and issued proposed decisions in a number of high profile cases involving Malaysian Airlines, AirAsia, and Megasteel. Future challenges are likely to involve investigation of more complex anti-competitive cases, review of government regulations with impact on competition, possible introduction of merger controls and regional integration.
    Keywords: competition policy, competition law, malaysia.
    JEL: K21 L40 L41
    Date: 2014–01
  4. By: Natalia Pavlova (National Research University Higher School of Economics); Andrey Shastitko (National Research University Higher School of Economics)
    Abstract: The article focuses on the effects that type I errors can have on the incentives of firms to compete, collude or engage in efficiency promoting socially beneficial cooperation. Our results confirm that in the presence of type I errors the introduction of a leniency program can have ambiguous effects, including the destruction and prevention of welfare enhancing horizontal cooperation agreements. The obtained results help understand the negative impact the hostility tradition resulting in type I enforcement errors can have on social welfare when applied to the regulation of horizontal agreements.
    Keywords: antitrust, competition, collusion, cooperation agreements, leniency, enforcement errors
    JEL: D43 K21 L41
    Date: 2014
  5. By: Samà, Danilo
    Abstract: In order to fight collusive behaviors, the best scenario for competition authorities would be the possibility to analyze detailed information on firms' costs and prices, being the price-cost margin a robust indicator of market power. However, information on firms' costs is rarely available. In this context, a fascinating technique to detect data manipulation and rigged prices is offered by an odd phenomenon called Benford's Law, otherwise known as First-Digit Law, which has been successfully employed to discover the ``Libor Scandal'' much time before the opening of the cartel settlement procedure. Thus, the main objective of the present paper is to apply a such useful instrument to track the price of the aluminium traded on the London Metal Exchange, following the allegations according to which there would be an aluminium cartel behind. As a result, quick tests such as Benford's Law can only be helpful to inspect markets where price patterns show signs of collusion. Given the budget constraints to which antitrust watchdogs are commonly subject to, a such price screen could be set up, just exploiting the data available, as warning system to identify cases that require further investigations.
    Keywords: Benford's Law, Cartel Detection, Collusion Screening, Competition Authorities, Data Manipulation, Monopolization, Oligopolistic Markets, Price Fixing, Variance Screen
    JEL: C10 D40 L13 L41
    Date: 2014
  6. By: Friehe, Tim (University of Bonn); Schildberg-Hörisch, Hannah (University of Bonn)
    Abstract: In economic models, risk and social preferences are major determinants of criminal behavior. In criminology, low self-control is considered a fundamental cause of crime. Relating the arguments from both disciplines, this paper studies the relationship between self-control and both risk and social preferences. To exogenously vary the level of self-control, we use a well-established experimental manipulation. We find that low self-control causes less risk-averse behavior. The effect of self-control on social preferences is not significant. In sum, our findings support the proposition that low self-control is a facilitator of crime. While our study is motivated by the literature on the determinants of criminal behavior, it has important implications for dual-system models and documents endogeneity of economic preferences.
    Keywords: criminal behavior, risk preferences, social preferences, ego-depletion, dual-system models, experiment, endogeneity of economic preferences
    JEL: K42 H23 C91
    Date: 2014–04
  7. By: Haveman, Heather A.; Kluttz, Daniel N.
    Abstract: We study copyright law and its relationship with cultural conceptions of authorship and technicalconstraints on the economics of publishing in the US. Because American copyright law was first developed in the eighteenth and nineteenth centuries, we focus on that time period. And because magazines were the primary forum for literary expression in America during this time, we study the magazine industry. Both technical and cultural factors created opportunities for magazines and imposed constraints on them, but most effects of copyright law were mediated by cultural, not technical, factors. Lack of copyright protection for foreign authors allowed magazines reprint foreign authors’ work for free. However, copyright law was not used by magazines to protect domestic work: very few claimed copyright over the original material they published and none of those claims were adjudicated by courts. Therefore, magazines reprinted work from domestic sources, including other magazines. Nevertheless, copyright law had constitutive effects on the literary market: it spurred the emergence of a cultural conception of the author-as-paid-professional; in turn, this cultural shift fostered the market for literature, as magazines began to pay authors for their work and compete intensely over the work of the most popular authors.
    Keywords: Social and Behavioral Sciences
    Date: 2014–02–21
  8. By: Sapovadia, Vrajlal; Patel, Akash
    Abstract: Corporate Governance is the relationship between corporate managers, directors and the capital providers, who save and invest their capital to earn money in form of dividend, interest or gain. Shareholders of the company appoint Board of Directors to fulfill their objectives aligned with the corporate objectives. Board of Directors appoints key managers for implementing corporate strategies. Corporate objectives are attained with the series of actions of the directors & managers. Capital & other necessary resources are provided by shareholders and other stakeholders to the company to fulfill the common objectives. It entails responsibility of corporate managers towards investors, society & environment that provides valuable resources to the corporation in achieving their objectives. Good corporate governance practices ensure that the board of directors is accountable for the pursuit of corporate objectives to enhance wealth of corporation and that the corporation itself conforms to the law and regulations in form & spirit. This paper identifies who are the levers of corporate governance and then investigates the powers of those levers, which influences the quality of corporate governance in corporate India. We critically analyze the effectiveness of Indian legal framework to ensure good corporate governance practices. The actors who can influence the quality of corporate governance are depicted in Chart-1 classified into (i) Internal: including shareholders, independent directors, audit & nomination committee and (ii) External: including auditors, Registrar of Companies, stock exchanges, Security Exchange Board of India and the Competition Commission of India.
    Keywords: Corporate Governance, Corporate Law, Company Law, SEBI, Primary Market, Secondary Market, Legal Compliance
    JEL: G3 G38 K2
    Date: 2013–11–25
  9. By: Samà, Danilo
    Abstract: The ultimate objective of the present paper is to empirically investigate the effectiveness of competition policy in developed and developing countries. Although its importance is continuously increasing, the effectiveness of competition policy still seems to lack the attention that it would deserve. At the present state of art, the number of academic contributions that attempts to estimate its impact on relevant economic variables appears very limited, in particular for the less developed countries. However, an empirical literature aimed at measuring in objective terms the effect of competition policy on economic growth is emerging, starting from narrow variables of interest, such as Gross Domestic Product and Total Factor Productivity. As a result, the principal aim of the current work is to contribute to this branch of research, focusing on broader indicators of market performance, in order to understand whether the presence of an antitrust authority has a significant impact, thus an effective utility, on the level of competition of a country.
    Keywords: Competition Authorities, Competition Policy, Developed Countries, Developing Countries, Economic Development, Economic Growth, Law & Economics, Market Concentration, Market Efficiency, Market Performance, New Institutional Economics, Political Economy
    JEL: C21 C26 K21 L40
    Date: 2013
  10. By: Mehri, Meryem
    Abstract: This paper considers an international sample of conventional and Islamic mutual funds to assess whether law, culture, and political risk affect the performance, risk-taking behavior and compensation fees of mutual funds. Overall, the results show strongly that legal conditions, culture, and political risk have robust differential effects on fees, performance and risk-taking behavior of Islamic funds and conventional funds. We find that Islamic mutual funds in countries with higher legal conditions receive lower fees, whereas conventional funds receive higher carried interest, lower fixed management fees and weaker expense ratio. In such conditions, conventional and Islamic fund managers have lower performance and take higher specific and systematic risk. Overall, Hoefsted culture’s measures affect significantly the fees structure, performance and risk-taking behavior with robust differential effects on Islamic and conventional funds. Focusing on political risk effects, we show that, in countries with higher political risk, carried interest and performance will be higher, whereas the specific and systematic risk will be stronger for Islamic and conventional funds. The components of country legality and political risk Index have significant differential effects on Islamic and conventional funds’ characteristics.
    Keywords: Performance; Risk; Managerial Compensation; Incentive Contracts; Mutual funds; Law and finance; Political risk;
    JEL: K29 G23 G24
    Date: 2014–03
  11. By: Nyberg, Sten (Dept. of Economics, Stockholm University); Priks, Mikael (Dept. of Economics, Stockholm University)
    Abstract: Should organizers of events, such as sport games or concerts, share the costs of maintaining public order in connection to the events? This question has been hotly debated in many countries, especially in connection to soccer hooliganism. Critics argue that organizers should do more to combat unruly behavior, which has significant external effects. The incentive to do so may be muted by the possibility of free riding on the police. We model how co-payments can address the under-provision of security on the part of organizers. However, it has been claimed that co-payments can backfire and lead financially constrained organizers to instead provide less, not more, security. We analyze under which circumstances this may be true. Finally, we exploit a natural experiment from the Swedish soccer league where police payments were introduced for some clubs only. The results are in line with the implications of the model.
    Keywords: Public order; private security; public events; co-payments for police; free-riding; externality; hooliganism; natural experiment
    JEL: H23 H49 K42 L83
    Date: 2014–04–10

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