|
on Law and Economics |
| By: | Benjamin Hansen; Glen R. Waddell |
| Abstract: | Previous research has found strong evidence that legal access to alcohol is associated with sizable increases in criminality. We revisit this relationship using the census of judicial records on criminal charges filed in Oregon Courts, the ability to separately track crimes involving firearms, and to track individuals over time. We find that crime increases at age 21, with increases mostly due to assaults lacking in premeditation, and alcohol-related nuisance crimes. We find no evident increases in rape or robbery. Among those with no prior criminal records, increases in crime are 50 percent larger; still larger for the most socially costly crimes of assault and drunk driving. This suggests that deterring criminality through increased punishments would likely prove difficult. |
| JEL: | H75 I1 I12 K42 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22568&r=law |
| By: | Eve-Angéline Lambert; Jean-Christian Tisserand |
| Abstract: | In a lot of real-life legal disputes, the parties have the obligation to nego- tiate before an external solution is imposed to them. We investigate theoret- ically and experimentally the impact of such a constraint on the behavior of bargainers and on the outcome of this bargaining. Individuals initially choose whether to bargain over the division of a pie, and if one of them refuses, then the bargaining may be imposed to them with some probability. We show that individuals who are forced to bargain are significantly more aggressive than those who initially choose to bargain, and this behavior is indeed partly due to the constraint. This implies that the fact to be constrained does not bring individuals to behave as if they had freely made this decision, which proves that the way the bargaining process is enforced is not neutral, and affects the outcome of this process. This feature should be taken into account for the design of legal procedures of resolution of individual and collective conflicts. |
| Keywords: | Bargaining; Conflicts; Enforcement; Forced negotiation. |
| JEL: | C78 C91 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2016-37&r=law |
| By: | Haar, Brigitte |
| Abstract: | This paper is the outcome of a related broader project, exploring the explanatory power of the Legal Theory of Finance, which proposes a new institution-based analytical framework for the analysis of phenomena of financial markets. One of its most important theoretical assumptions, the legal construction of financial markets, is highlighted by the example of the private creation of money by structured finance products in this paper. Further implications can then be shown referring to pari passu clauses and collective action clauses, which are both exhibit a differential application of these legal rules according to the hierarchical status of the respective market participant, and can therefore endanger sovereign debt restructurings. Legal instruments to avoid this are briefly explored. An example of another key role of the law in crisis that is the task to resolve the tension between market discipline and financial stability is exemplified by the regulation of the OTC derivatives market and proposals of effective loss-sharing among CCPs. Related questions about the significance of legal rules to ensure financial stability are raised in the analysis of minimum capital requirements under Basel III. |
| Keywords: | law and finance,financial stability,financial contracts,structured finance,asset-backed securities,pari passu clauses,collective action clauses,otc derivatives markets,central counter parties,Basel III,coco bonds |
| JEL: | G38 K12 K20 K22 N20 O16 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:141&r=law |
| By: | Thomas Goda; Alejandro Torres |
| Abstract: | Rational choice models argue that income inequality leads to a higher expected utility of crime and thus generates incentives to engage in illegal activities. Yet, the results of empirical studies do not provide strong support for this theory; in fact, Neumayer provides apparently strong evidence that income inequality is not a significant determinant of violent property crime rates when a representative sample is used and country specific fixed effects are controlled for. An important limitation of this and other empirical studies on the subject is that they only consider proportional income differences, even though in rational choice models absolute difference in legal and illegal incomes determine the expected utility of crime. Using the same methodology and data as Neumayer, but using absolute inequality measures rather than proportional ones, this paper finds that absolute income inequality is a statistically significant determinant of robbery and violent theft rates. This result is robust to changes in sample size and to different absolute inequality measures, which not only implies that inequality is an important correlate of violent property crime rates but also suggests that absolute measures are preferable when the impact of inequality on property crime is studied. |
| Keywords: | Violent Crime; Property Crime; Income Inequality, Absolute Inequality |
| JEL: | D31 D63 K42 |
| Date: | 2016–08–22 |
| URL: | http://d.repec.org/n?u=RePEc:col:000122:015016&r=law |
| By: | Acheson, Graeme G.; Campbell, Gareth; Turner, John D. |
| Abstract: | This paper examines the origins of investor protection under the common law by analysing the development of shareholder protection in Victorian Britain, the home of the common law. In this era, very little was codified, with corporate law simply suggesting a default template of rules. Ultimately, the matter of protection was one for the corporation and its shareholders. Using c. 500 articles of association and ownership records of publicly-traded Victorian corporations, we find that corporations afforded investors with just as much protection as is present in modern corporate law and that firms with better shareholder protection had more diffuse ownership. |
| Keywords: | law and finance,ADRI,shareholder protection,corporate ownership,common law |
| JEL: | G32 G34 G38 K22 N23 N43 N83 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:qucehw:201604&r=law |
| By: | Porzecanski, Arturo C. |
| Abstract: | The voluminous and protracted litigation and arbitration saga featuring the Republic of Argentina (mostly as defendant or respondent, respectively) established important legal and arbitral precedents, as illustrated by three cases involving Argentina which were appealed all the way up to the U.S. Supreme Court and were settled in 2014. At first glance, the scale of Argentina-related litigation activity might be explained by the sheer size of the government’s 2001 default, the world’s largest-ever up to that point. However, its true origins were the unusually coercive, aggressive way that the authorities in that country went about defaulting on, and restructuring, their sovereign debt obligations, as well as the radical, seemingly irreversible changes to the “rules of the game” affecting foreign strategic investors, which broke binding commitments prior governments had made in multiple bilateral investment treaties. |
| Keywords: | Argentina, FSIA, sovereign, default, expropriation, restructuring, New York, ICSID |
| JEL: | E6 F3 F34 F5 F51 F65 H63 K4 N26 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:73377&r=law |
| By: | Schmolke, Klaus Ulrich; Utikal, Verena |
| Abstract: | Law makers increasingly try to capitalize on individuals having acquired knowledge of corporate crimes or other misconduct by inducing them to blow the whistle. In a laboratory experiment we measure the effectiveness of incentives on the willingness to report such misconduct to a sanctioning authority. We find that fines for non-reporting insiders, rewards and even simple commands increase the probability of whistleblowing. We find the strongest effect for fines. Situational determinants also influence the willingness to blow the whistle: Insiders who are negatively affected by the misconduct are more likely to blow the whistle than non-affected or profiting insiders. Those (negatively affected) victims are also sensitive to the misconduct's impact on the authority sanctioning the misconduct (public authority or employer): Whistleblowing is more likely if the enforcement authority is negatively affected compared to positively or not affected. |
| Keywords: | whistleblowing,incentives,situational determinants,experiment |
| JEL: | C91 D82 K42 M59 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwqwdp:092016&r=law |
| By: | Chen, Yefeng (Zhejiang University); Jiang, Shuguang (Zhejiang University); Villeval, Marie Claire (CNRS, GATE) |
| Abstract: | We investigate corruption as a social dilemma by means of a bribery game in which a risk of collective sanction of the public officials is introduced when the number of officials accepting a bribe from firms reaches a certain threshold. We show that, despite the social risk, the pursuit of individual interest prevails and leads to the elimination of honest officials over time. Reducing the size of the groups while increasing the probability of collective sanction diminishes the officials' corruptibility but is not sufficient to eliminate the Tragedy of corruption that leads both firms and officials to earn less than in the absence of corruption. |
| Keywords: | corruption, social dilemma, collective risk, sanction, experiment |
| JEL: | C92 D73 H41 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10175&r=law |
| By: | Chen, Yongmin; Sappington, david |
| Abstract: | We analyze the optimal design of damages for patent infringement in settings where the patent of an initial innovator may be infringed by a follow-on innovator. We consider damage rules that are linear combinations of the popular "lost profit" (LP) and "unjust enrichment" (UE) rules, coupled with a lump-sum transfer between the innovators. We identify conditions under which a linear rule can induce the socially optimal levels of sequential innovation and the optimal allocation of industry output. We also show that, despite its simplicity, the optimal linear rule achieves the highest welfare among all rules that ensure a balanced budget for the industry, and often secures substantially more welfare than either the LP rule or the UE rule. |
| Keywords: | Patents, sequential innovation, infringement damages, linear rules for patent damages. |
| JEL: | D4 K2 O3 |
| Date: | 2016–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:73438&r=law |
| By: | Dong, Ailin; Massa, Massimo; Zaldokas, Alminas |
| Abstract: | In a cross-country study we look at the staggered passage of national leniency laws over 1990-2012. We show that these laws lead to more convictions of cartels, and generally increase the costs of collusion by reducing the average gross margins of the affected firms. We further examine how changing costs of collusion shape firm boundaries and show that firms reorganize their activities by engaging in more horizontal acquisitions, both in the roles as the acquirer and the target. These acquisitions tend to be associated with higher announcement returns. We find little evidence of the increase in strategic alliances or greenfield investments. |
| Keywords: | cartels; Collusion; firm boundaries; leniency laws; M&A |
| JEL: | D22 D43 G34 G38 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11470&r=law |
| By: | Eckert, Andrew (University of Alberta, Department of Economics); Klumpp, Tilman (University of Alberta, Department of Economics); Su, Xuejuan (University of Alberta, Department of Economics) |
| Abstract: | We develop a duopoly model in which firms compete for the market (e.g., investing in process innovation or product development) as well as in the market (e.g., setting quantities or prices). Competition for the market generates multiple equilibria that differ in the firms' investment levels, relative size, and profi tability. We show that monopolization that affects competition in the market can act as an equilibrium selection device in competition for the market. In particular, it eliminates equilibria that are undesirable for the monopolizing rm, while not generating new equilibria. This result complicates the task of determining whether a rm's dominance in a given market is the result of fair competition or unlawful monopolization. We discuss a number of implications for antitrust policy and litigation, and illustrate these by means of two well-known antitrust cases. |
| Keywords: | Monopolization; antitrust; multiple equilibria; indeterminacy; firm behavior |
| JEL: | D40 K20 L40 |
| Date: | 2016–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2016_013&r=law |
| By: | Rahul RK Kapoor; Nicolas van Zeebroeck |
| Keywords: | Patent Litigation; Opposition; Patent System; Patent Value; Patent Strategy; European Patent Office |
| Date: | 2016–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:ict:wpaper:2013/235144&r=law |
| By: | Matthew Chesnes; Ginger Zhe Jin |
| Abstract: | Beginning in 1997, the Food and Drug Administration (FDA) allowed television advertisements to make major statements about a prescription drug, while referring to detailed drug information on the internet (FDA 1997; 2015). The hope was that consumers would seek additional information online to fully understand the risks and benefits of taking the medication. To better understand the effects of the policy, we analyze direct-to-consumer advertising (DTCA) and search engine click-through data on a set of drugs over a three-year period. Regression analysis shows that advertising on a prescription drug serves to increase the frequency of online search and subsequent clicks for that drug, as well as search for other drugs in the same class. We find the relationship between DTCA and search is stronger for younger drugs, for those drugs that treat acute conditions, those drugs that are less likely to be covered by insurance, and those whose searcher population tends to be older. These findings suggest that DTCA motivates consumers to search online for drug information, but the magnitude of the effect is heterogeneous and potentially associated with clicks on websites that are more promotional in nature. |
| JEL: | D83 I12 K32 L81 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22582&r=law |
| By: | Hofer. Katharina |
| Abstract: | Does transparency affect the decision to shirk or work? The question is analyzed using the example of parliamentary voting. Without transparency, politicians have little incentive to attend all votes in parliament. But if voters have means to monitor their representatives' effort, incumbents face the trade-off between shirking and deteriorating reelection prospects the more votes they miss. A 2014 institutional change in the Swiss Upper House allows testing the theoretical prediction. The introduction of an electronic voting system involved individual decisions on several types of votes to be automatically published whereas all other votes remained secret to the public. Pre- and post-reform attendance during secret votes comes from video recordings of all sessions. This variation in monitoring depending exogenously on vote types allows identifying a causal effect of monitoring on shirking measured by attendance. Legislators shirk less once attendance is monitored. The effect is particularly strong among politicians for whom reelection is most valuable: incumbents aspiring for another term, full-time politicians who devoted themselves to a career in parliament, and legislators with few interest groups. |
| Keywords: | Shirking; Absence; Monitoring; Transparency; Parliament; Legislators; Accountability |
| JEL: | D72 P16 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:usg:econwp:2016:16&r=law |
| By: | Julien Jacob; Marc Hubert-Depret; Cornel Oros |
| Abstract: | We consider the case of a firm selling a product which can cause damage to consumers (e.g. a product containing hazardous chemicals which can cause diseases). The firm has the possibility to make an effort in R&D in order to discover a new substitution product. This R&D could lead to a new but more dangerous product than the historical product (situation of “regrettable substitution”). We compare four policy regimes (two forms of ex ante approval, civil liability, and a combination of approval and civil liability) according to their impact on the firm’s decisions (R&D, and technological choice) and their consequences on social welfare. We find that the ranking between policy regimes mainly depends on the public regulator’s expertise (for approval), the type of the risk which is under consideration and/or the potential impact of R&D on the degree of dangerousness. |
| Keywords: | public regulation, innovation, technical choice, (health) hazard. |
| JEL: | D21 D62 L51 K13 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2016-36&r=law |