nep-law New Economics Papers
on Law and Economics
Issue of 2014‒12‒13
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Focusing Law Enforcement When Offenders Can Choose Location By Tim Friehe; Thomas J. Miceli
  2. Foreclosure, Vacancy and Crime By Lin Cui; Randall Walsh
  3. Subjective Beliefs, Deterrence, and the Propensity to Drive While Intoxicated By Yiqun Chen; Frank Sloan
  4. Common Law Marriage and Couple Formation By Grossbard, Shoshana; Vernon, Victoria
  5. Corporate groups: A German's European perspective By Tröger, Tobias H.
  6. Internet governance: Gambling on the periphery By Sutherland, Ewan
  7. On the Distributive Costs of Drug-Related Homicides By Nicolas Ajzenman; Sebastian Galiani; Enrique Seira
  8. On the antitrust economics of the electronic books industry By Gaudin, Germain; White, Alexander
  9. How to deal with international terrorism By Krieger, Tim; Meierrieks, Daniel
  10. The Internet Economy - Regulatory Challenges and Practices By Isabell Koske; Rosamaria Bitetti; Isabelle Wanner; Ewan Sutherland
  11. Storable Votes and Judicial Nominations in the U.S. Senate By Alessandra Casella; Sébastien Turban; Gregory J. Wawro

  1. By: Tim Friehe (University of Bonn); Thomas J. Miceli (University of Connecticut)
    Abstract: This paper incorporates the reality that the bulk of law enforcement is decentralized while sanctions are chosen centrally, and explores the implications for the socially optimal sanction level. The presence of interregional externalities in the form of crime diversion induces socially excessive law enforcement incentives at the local level. We show that the adverse repercussions of uncoordinated enforcement decisions at the local level may be ameliorated by setting a nonmaximal sanction at the central level. In other words, we establish that the decentralization of law enforcement may effectively constrain socially optimal sanction levels.
    Keywords: crime, deterrence, federalism, spillovers, optimal sanctions
    JEL: K42
    Date: 2014–11
  2. By: Lin Cui; Randall Walsh
    Abstract: This paper examines the impact of residential foreclosures and vacancies on violent and property crime. To overcome confounding factors, a difference-in-difference research design is applied to a unique data set containing geocoded foreclosure and crime data from Pittsburgh, Pennsylvania. Results indicate that while foreclosure alone has no effect on crime, violent crime rates increase by roughly 19% once the foreclosed home becomes vacant -an effect that increases with length of vacancy. We find weak evidence suggesting a potential vacancy effect for property crime that is much lower in magnitude.
    JEL: J18 R14 R3
    Date: 2014–10
  3. By: Yiqun Chen; Frank Sloan
    Abstract: This study investigates causal effects of changes in subjective probabilities of being pulled over and involved in accidents if driving while intoxicated on individuals’ drinking and driving choices. We also examine how hypothetical changes in perceptions of sanction severity affect drunk driving by experiments randomizing the harshness of punishments. We find that higher perceived risks of being pulled over and involved in accidents deter drinking and driving. However, deterrence is limited to persons who are alcohol addicted, lack of self-control over drinking, and are more impulsive. No deterrent effect of harsher legal punishments is found on individuals’ drunk driving choices.
    JEL: D04 D84 I12 I18
    Date: 2014–11
  4. By: Grossbard, Shoshana (San Diego State University); Vernon, Victoria (Empire State College)
    Abstract: The Current Population Survey is used to investigate effects of Common Law Marriage (CLM) on whether young US-born adults live in couples in the U.S. CLM effects are identified through cross-state and time variation, as some states abolished CLM over the period examined. Analysis based on Gary Becker's marriage economics helps explain why CLM affects couple formation and does so differently depending on education, sex ratios and parent status. CLM reduces in-couple residence, and more so for childless whites and where there are fewer men per woman. Effects are larger for college-educated men and women without college.
    Keywords: Common-Law Marriage, couple, couple formation, marriage, cohabitation, Gary Becker
    JEL: J10 J12 J16
    Date: 2014–09
  5. By: Tröger, Tobias H.
    Abstract: This paper contrasts the recent European initiatives on regulating corporate groups with alternative approaches to the phenomenon. In doing so it pays particular regard to the German codified law on corporate groups as the polar opposite to the piecemeal approach favored by E.U. legislation. It finds that the European Commission's proposal to submit (significant) related party transactions to enhanced transparency, outside fairness review, and ex ante shareholder approval is both flawed in its design and based on contestable assumptions on informed voting of institutional investors. In particular, the contemplated exemption for transactions with wholly owned subsidiaries allows controlling shareholders to circumvent the rule extensively. Moreover, vesting voting rights with (institutional) investors will not lead to the informed assessment that is hoped for, because these investors will rationally abstain from active monitoring and rely on proxy advisory firms instead whose competency to analyze non-routine significant related party transactions is questionable. The paper further delineates that the proposed recognition of an overriding interest of the group requires strong counterbalances to adequately protect minority shareholders and creditors. Hence, if the Commission choses to go down this route it might end up with a comprehensive regulation that is akin to the unpopular Ninth Company Law Directive in spirit, though not in content. The latter prediction is corroborated by the pertinent parts of the proposal for a European Model Company Act.
    Keywords: Corporate Groups,Related Party Transactions,Tunneling,Corporate Governance,E.U. Corporate Law,Shareholder Rights Directive,Group Interest,Minority Shareholder Protection,Creditor Protection
    JEL: D23 D62 K22
    Date: 2014
  6. By: Sutherland, Ewan
    Abstract: Use of the Internet by entrepreneurs has transformed gambling. Many have notionally located their businesses away from jurisdictions with heavy taxes and intrusive regulation, to offshore centres with very low taxes and regulations intended to prove their statistics and the avoidance of money laundering. Alderney and Gibraltar have been able to generate substantial revenues by offering such terms. Antigua and Barbuda had to engage in a WTO trade dispute with the USA, which it won, but has yet to be compensated. Larger countries responded slowly, by lightening their regulations and taxes. The flows of money have attracted criminals, some of whom bribe players for spot bets or even to fix matches. Despite the centrality of the Internet to these changes, the issue of gambling has remained peripheral to Internet governance, when it could learn and when it could contribute to finding solutions.
    Keywords: Internet,governance,gambling,gaming,law,enforcement
    Date: 2014
  7. By: Nicolas Ajzenman (Harvard Kennedy School); Sebastian Galiani (University of Maryland); Enrique Seira (Centro de Investigación Económica (CIE), Instituto Tecnológico Autónomo de México (ITAM))
    Abstract: We are first paper to study the economic effects of drug-trafficking organization violence. We exploit the manyfold increase in homicides in 2008-2011 in Mexico resulting from its war on organized drug traffickers to estimate the effect of drug-related homicides on house prices. We use an unusually rich dataset that provides national coverage on house prices and homicides and exploit within-municipality variations. We find that the impact of violence on housing prices is borne entirely by the poor sectors of the population. An increase in homicides equivalent to one standard deviation leads to a 3% decrease in the price of low-income housing. In spite of this large burden on the poor, the willingness to pay in order to reverse the increase in drug-related crime is not high. We estimate it to be approximately 0.1% of Mexico’s GDP
    Keywords: Drug-related homicides; Costs of crime; Poverty.
    JEL: K4 I3
    Date: 2014
  8. By: Gaudin, Germain; White, Alexander
    Abstract: When Apple entered the ebook market, prices rose. A recent court decision found Apple guilty of colluding with publishers, blaming the price hike, in part, on agency agreements and prohibiting their use. Building a model to compare these with traditional wholesale agreements, we identify a single, pivotal condition that leads prices under agency to be higher than under wholesale with two-part tariffs but lower with linear pricing. Our model shows that the increase in ebook prices can be explained, instead, by heightened competition for reading devices, and it guides our understanding of when restricting agency agreements is advisable.
    Keywords: Electronic Books,Antitrust in High-Tech Industries,Vertical Contracting,Wholesale vs. Agency Agreements,Media Economics
    JEL: D21 D40 L23 L4 L42 L51 L82 L86
    Date: 2014
  9. By: Krieger, Tim; Meierrieks, Daniel
    Abstract: Since the 9/11 attacks on New York and Washington D.C., the fight against international terrorism has been a dominant issue in the political arena. Policy-makers (still) face the challenge to develop sound strategies for fighting this type of terrorist activity. Unfortunately, there is no universal strategy to counter terrorism. This is partly due to the diverse and clandestine nature of terrorist groups, and partly due to misperceptions, lack of precise knowledge as well as divergent interests and prioritization on part of policy-makers. The present chapter aims at providing a systematic overview on how to deal with (international) terrorism, taking on a law and economics perspective. More specifically, we will examine how the rule of law - both nationally and internationally (i.e., in terms of the international law) - interacts with international terrorism and how it can be sustained under the extreme conditions of terrorism.
    Date: 2014
  10. By: Isabell Koske; Rosamaria Bitetti; Isabelle Wanner; Ewan Sutherland
    Abstract: The Internet has become an integral part of the everyday life of households, firms and governments. Its proper functioning over the long run is therefore crucial for economic growth and people’s wellbeing more generally. The success of the Internet depends on its openness and the confidence of users. Designing policies that protect society while allowing for Internet’s great economic potential to be fulfilled, is a difficult task. This paper investigates this challenge and takes stock of existing regulations in OECD and selected non-OECD countries in specific areas related to the digital economy. It finds that despite the regulatory difficulties, the Internet is far from being a “regulation-free” space as there are various industry standards, co-regulatory agreements between industry and the government, and in some cases also state regulation. Most of them aim at protecting personal data and consumers more generally. In many cases generally applicable laws and regulations exist that address privacy, security and consumer protection issues both in the traditional and the digital economy.<P>L'économie internet - Enjeux et pratiques de la réglementation<BR>L'Internet fait partie intégrante de la vie quotidienne des ménages, des entreprises et des gouvernements. Son bon fonctionnement sur le long terme est donc crucial pour la croissance économique et le bien-être de la population en général. Le succès de l'Internet dépend de son ouverture et de la confiance des utilisateurs. Concevoir des politiques qui protègent les utilisateurs et la société, mais aussi qui permettent que les grands avantages de l'Internet soit pleinement récoltés est une tâche difficile. Cette étude discute quelques-uns des défis liés au développement d’Internet et fait le bilan de la réglementation en vigueur dans l'OCDE et certains pays non membres de l'OCDE dans des domaines spécifiques liés de l'économie numérique. Il constate que, malgré les difficultés réglementaires, l'Internet est loin d'être un espace "libre de réglementation". Il existe diverses normes de l'industrie, des accords de co-régulation entre l'industrie et le gouvernement, et dans certains cas, la réglementation de l'État. La plupart de ces règles visent à protéger les données personnelles et plus généralement les consommateurs. Dans de nombreux cas des lois et règlements d'application générale existent qui adressent les questions de confidentialité, de sécurité et de protection des consommateurs à la fois dans l’économie traditionnelle et numérique.
    Keywords: internet, competition, regulation, consumer protection, digital economy, économie numérique, protection des consommateurs, Internet, concurrence, réglementation
    JEL: D18 K2 L1 L5 L81 L82 L86
    Date: 2014–11–12
  11. By: Alessandra Casella; Sébastien Turban; Gregory J. Wawro
    Abstract: We model a procedural reform aimed at restoring a proper role for the minority in the confirmation process of judicial nominations in the U.S. Senate. We analyze a proposal that would call for nominations to the same level court to be collected in periodic lists and voted upon individually with Storable Votes, allowing each senator to allocate freely a fixed number of total votes. Although each nomination is decided by simple majority, storable votes make it possible for the minority to win occasionally, but only when the relative importance its members assign to a nomination is higher than the relative importance assigned by the majority. Numerical simulations, motivated by a game theoretic model, show that under plausible assumptions a minority of 45 senators would be able to block between 20 and 35 percent of nominees. For most parameter values, the possibility of minority victories increases aggregate welfare.
    JEL: D72 H11 K40
    Date: 2014–09

This nep-law issue is ©2014 by Eve-Angeline Lambert. 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.