nep-law New Economics Papers
on Law and Economics
Issue of 2016‒06‒14
seven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Adversarial decision-making: Choosing between models constructed by interested parties By Froeb, Luke M.; Ganglmair, Bernhard; Tschantz, Steven
  2. Violence and Birth Outcomes: Evidence from Homicides in Brazil By Koppensteiner, Martin; Manacorda, Marco
  3. Vertical Integration and Downstream Collusion By Sara Biancini; David Ettinger
  4. Study the Possibility of Introducing the Tax Rules in the Allocation of Costs to the Russian Tax Legislation By Shatalov, Stanislav; Zakharenkova, E.
  5. Exclusive dealing with costly rent extraction By Calzolari, Giacomo; Denicolò, Vincenzo; Zanchettin, Piercarlo
  6. Attorney fees in repeated relationships By Graham, Brad; Robles, Jack
  7. Joint custody laws and mother's welfare: Evidence from the US By Daniela Vuri

  1. By: Froeb, Luke M.; Ganglmair, Bernhard; Tschantz, Steven
    Abstract: In this paper, we characterize adversarial decision-making as a choice between competing interpretations of evidence ("models") constructed by interested parties. We show that if a court cannot perfectly determine which party's model is more likely to have generated the evidence, then adversaries face a tradeoff: a model further away from the best (most likely) interpretation has a lower probability of winning, but also a higher payoff following a win. We characterize equilibrium when both adversaries construct optimal models, and use the characterization to compare adversarial decision-making to an inquisitorial benchmark. We find that adversarial decisions are biased, and the bias favors the party with the less-likely, and more extreme, interpretation of the evidence. Court bias disappears when the court is better able to distinguish between the likelihoods of the competing models, or as the amount of evidence grows.
    Keywords: adversarial justice; evidence-based decision-making; expert testimony; inquisitorial justice; litigation; persuasion games; science vs. advocacy
    JEL: C72 D74 K41
    Date: 2016–03–28
  2. By: Koppensteiner, Martin; Manacorda, Marco
    Abstract: This paper uses microdata from Brazilian vital statistics on births and deaths between 2000 and 2010 to estimate the impact of in-utero exposure to local violence - measured by homicide rates - on birth outcomes. The estimates show that exposure to violence during the first trimester of pregnancy leads to a small but precisely estimated increase in the risk of low birthweight and prematurity. Effects are found both in small municipalities, where homicides are rare, and in large municipalities, where violence is endemic, and are particularly pronounced among children of poorly educated mothers, implying that violence compounds the disadvantage that these children already suffer as a result of their households' lower socioeconomic status.
    Keywords: Birth Outcomes; Birthweight; Brazil.; Homicides; Stress
    JEL: I12 I15 I39 J13 K42
    Date: 2016–05
  3. By: Sara Biancini (Normandie Université, UNICAEN, CREM CNRS, France); David Ettinger (Paris Dauphine, PSL, LEDa and CEREMADE, France)
    Abstract: We investigate the effect of a vertical merger on downstream firms' ability to collude in a repeated game framework. We show that a vertical merger has two main effects. On the one hand, it increases the total collusive profits, increasing the stakes of collusion. On the other hand, it creates an asymmetry between the integrated firm and the unintegrated competitors. The integrated firm, accessing the input at marginal cost, faces higher profits in the deviation phase and in the non cooperative equilibrium, which potentially harms collusion. As we show, the optimal collusive profit-sharing agreement takes care of the increased incentive to deviate of the integrated firm, while optimal punishment erases the difficulty related to the asymmetries in the non cooperative state. As a result, vertical integration generally favors collusion.
    Keywords: Vertical Integration, Tacit Collusion
    JEL: D43 L13 L40 L42
    Date: 2016–05
  4. By: Shatalov, Stanislav (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Zakharenkova, E. (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: The report presents the analysis of the legal nature and practical implementation of cost sharing mechanism and conclusions on the possibility to introduce cost sharing rules in the Russian tax legislation. The results of the work are based on the thorough analysis of the theory and practice of cost sharing in Russia and worldwide.
    Keywords: cost sharing mechanism, cost sharing rules, tax legislation, Russia
    Date: 2016–04–05
  5. By: Calzolari, Giacomo; Denicolò, Vincenzo; Zanchettin, Piercarlo
    Abstract: We analyze the impact of exclusive contracts on the intensity of competition among firms that supply substitute products. Exclusive contracts would be neutral if firms priced at marginal cost and extracted buyers' rent by means of non distortionary fixed fees. We focus instead on the case in which rent extraction is costly, and hence firms distort marginal prices upwards. We show that in this case exclusive contracts are anti-competitive when the dominant firm enjoys a large enough competitive advantage over its rivals, and are pro-competitive, or neutral, when the competitive advantage is small. These effects appear as soon as marginal prices are distorted upwards, irrespective of which specific factors impede perfect rent extraction.
    Keywords: Antitrust; Dominant firm; Exclusive dealing; Rent extraction
    JEL: D42 D82 L42
    Date: 2016–05
  6. By: Graham, Brad; Robles, Jack
    Abstract: We investigate contracts between a law firm and a corporate client involved in a repeated relationship. In contrast to the previous literature pertaining to one-time interactions between clients and attorneys, we find that the contingent fee is not the best arrangement. Rather, the contingent fee is dominated by a contract which, we argue, an outside observer could not distinguish from simple hourly fee contract. This contract includes an hourly fee equal to the law firm’s opportunity cost, a lump sum, and a retention function. The lump sum payment is independent of the number of hours worked by the law firm and the outcome of the case. The repeated nature of the relationship allows the client to create a contract where the desire to maintain the relationship induces the law firm to exert the optimal level of effort in the current case.
    Keywords: Legal services, Contract, Contingent fee, Repeated relationship,
    Date: 2016
  7. By: Daniela Vuri (DEF & CEIS,University of Rome Tor Vergata, IZA, CESifo)
    Abstract: Recent research has focused on the consequences on the unilateral divorce laws on several aspects of individual behavior but the issue of children custody after divorce has been almost neglected. This paper studies the implications on mothers of the changes in child custody law from maternal preference to joint custody using the 1960-2000 Census Public Use Micro Sample (IPUMS). Variation in the timing of joint custody reforms across states provides a natural experimental framework to study the causal effect of shared custody on mothers' economic outcomes. We also study the heterogeneity of the effect according to the years of exposure and to the age of the child at the time of the reform. The results show that divorced/separated mothers are negatively affected by the adoption of the joint custody laws in terms of a decrease in total income and earnings, exposing them to a higher risk of poverty. The paper discusses a possible rationale for these fidings in terms of higher child support payments the mother gets from the non custodial father in case of joint custody which might discourage them from looking for high paid jobs or investing in their careers.
    Keywords: joint custody laws, bargaining, difference in difference
    JEL: J12 J13
    Date: 2016–05–27

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