nep-law New Economics Papers
on Law and Economics
Issue of 2017‒10‒22
twelve papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The Diffusion of New Institutions: Evidence from Renaissance Venice's Patent System By Stefano Comino; Alberto Galasso; Clara Graziano
  2. Rights on Data: Competition, Innovation, and Competition Law: Dissecting the Interplay By Wolfgang Kerber
  3. Does Fiscal Equalization Lead to Higher Tax Rates? Empirical Evidence from Germany By Krause, Manuela; Büttner, Thiess
  4. Advertising Competition in the Free-to-Air TV Broadcasting Industry By Marc Ivaldi; Jiekai Zhang
  5. Legal possibilities concerning restructuring of companies in business difficulties By Čuveljak, Jelena; Rašić, Mario
  6. Partners in Crime: Diffusion of Responsibility in Antisocial Behaviors By Behnk, Sascha; Hao, Li; Reuben, Ernesto
  7. The Children of the Missed Pill By Tomás Rau; Miguel Sarzosa; Sergio S. Urzúa
  8. Collusion in Two-Sided Markets By Yassine Lefouili; Joana Pinho
  9. Democracy and compliance in public goods games By Gallier, Carlo
  10. Patent Examiner Specialization By Cesare Righi; Timothy Simcoe
  11. Salience in Retailing: Vertical Restraints on Internet Sales By Magdalena Helfrich; Fabian Herweg
  12. Confucianism and the Legalism: A Model of the National Strategy of Governance in Ancient China By Zhou, Haiwen

  1. By: Stefano Comino; Alberto Galasso; Clara Graziano
    Abstract: What factors affect the diffusion of new economic institutions? This paper examines this question exploiting the introduction of the first regularized patent system which appeared in the Venetian Republic in 1474. We begin by developing a model which links patenting activity of craft guilds with provisions in their statutes. The model predicts that guild statutes that are more effective at preventing outsider’s entry and at mitigating price competition lead to less patenting. We test this prediction on a new dataset which combines detailed information on craft guilds and patents in the Venetian Republic during the Renaissance. We find a negative association between patenting activity and guild statutory norms which strongly restrict entry and price competition. We show that guilds which originated from medieval religious confraternities were more likely to regulate entry and competition, and that the effect on patenting is robust to instrumenting guild statutes with their quasi-exogenous religious origin. We also find that patenting was more widespread among guilds geographically distant from Venice, and among guilds in cities with lower political connection which we measure exploiting a new database on noble families and their marriages with members of the great council. Our analysis suggests that local economic and political conditions may have a substantial impact on the diffusion of new economic institutions.
    Keywords: patents, competition, guilds, institutions
    JEL: O33 O34 K23
    Date: 2017
  2. By: Wolfgang Kerber (University of Marburg)
    Abstract: The digital revolution has reinvigorated the discussion about the problem how to consider innovation in the application of competition law. This raises difficult questions about the relationship between competition and innovation as well as what kind of assessment concepts competition authorities should use for investigating innovation effects, e.g., in merger cases. This paper, on one hand, reviews briefly our economic knowledge about competition and innovation, and claims that it is necessary to go beyond the limited insights that can be gained from industrial economics research about innovation (Schumpeter vs. Arrow discussion), and take into account much more insights from innovation research, evolutionary innovation economics, and business and management studies. On the other hand, it is also necessary to develop much more innovation-specific assessment concepts in competition law (beyond the traditional product market concept). Using the example of assessing innovation competition in merger cases, this article suggests to analyze much more systematically the resources (specialized assets) that are necessary for innovation. This concept is directly linked to the new discussion about the Dow/DuPont case in the EU and about data as necessary resource for (data-driven) innovation.
    Keywords: Competition, innovation, competition law, merger control, innovation market
    JEL: K21 L12 L41 O31
    Date: 2017
  3. By: Krause, Manuela; Büttner, Thiess
    Abstract: This paper explores the role of fiscal equalization as a driver of states’ tax policy in Germany. We argue that fiscal redistribution of tax revenues provides an incentive for states to increase their tax rates. The analysis exploits differences in the degree of fiscal redistribution among the states over time. The results show a significant effect on tax policy: with full equalization of revenues from the real estate transfer tax the tax rate is about one percentage point higher than without.
    JEL: H20 H26 R38
    Date: 2017
  4. By: Marc Ivaldi; Jiekai Zhang
    Abstract: This paper empirically investigates the advertising competition in the French broadcast television industry within a two-sided market framework. We use a unique dataset on the French broadcast television market including audience, prices, and quantities of advertising of twenty-one TV channels from March 2008 to December 2013. We specify a structural model of oligopoly competition and identify the shape and magnitude of the feedback loop between TV viewers and advertisers. We also implement a simple procedure to identify the conduct of firms on the market. We find that the nature of competition in the French TV advertising market is of the Cournot type. Further, we provide empirical evidence that the price-cost margin is not a good indicator of the market power of firms operating on two-sided markets. Finally, we provide a competition analysis. The counterfactual simulation suggests that the merger of advertising sales houses would not have significantly affected the equilibrium outcomes in this industry because of the strong network externalities between TV viewers and advertisers. These results provide a critical evaluation of the 2010 decision of the French competition authority to authorize the acquisition of two broadcast TV channels by a large media group under behavioral remedies.
    Keywords: advertising, competition, media, TV, two-sided market, market conduct
    JEL: D22 K21 L13 L22 L41 M37
    Date: 2017
  5. By: Čuveljak, Jelena; Rašić, Mario
    Abstract: Since difficulties during business are an integral part of entrepreneurship, the Croatian legislative offers several restructuring models for companies who have business issues. The pre-bankruptcy agreement is available in cases when the debtor is threatened by insolvency and during this procedure, the business of the company is still managed by the existing management board. However, it is necessary that the pre-bankruptcy procedure is finished within a short deadline. The bankruptcy procedure is commenced on grounds of over-indebtedness and when in a state of incapacity to make payments, Future business is managed by the insolvency practitioner. The extraordinary administration procedure in companies of systemic importance for the Republic of Croatia is initiated in cases where large enterprises are faced with bankruptcy or pre-bankruptcy reasons. During this procedure, the business of the parent-company is conducted by the extraordinary trustee. Each of the aforementioned procedures (models) has its specifications and legal consequences for all stakeholders involved (debtor, management board and creditors). This paper will use the comparative legal research methodology to analyze the differences between them: the grounds for commencing the procedures, continuing company’s business operations, deadlines and the aftermaths for the creditors and shareholders of the company. The focus of the paper will be to demonstrate that each procedure can preserve financially positive business of the companies in problems. Several legal models should enable timely restructuring of companies, which can secure the safety of sustainable businesses and help create and maintain employment, while also can reduce the risk in the finance sector connected with converting loans to poor credits. However, the success of the negotiations with relevant stakeholders, namely creditors, and the percentage of creditor’s payment returns largely depend on early detection of business problems and prompt opening of appropriate proceedings.
    Keywords: insolvency,bankruptcy,pre-insolvency,restructuring in bankruptcy,extraordinary administration
    JEL: K22 K20 L53
    Date: 2017
  6. By: Behnk, Sascha (University of Zurich); Hao, Li (University of Arkansas, Fayetteville); Reuben, Ernesto (New York University, Abu Dhabi)
    Abstract: Using a series of sender-receiver games, we find that two senders acting together are willing to behave more antisocially towards the receiver than single senders. This result is robust in two contexts: when antisocial messages are dishonest and when they are honest but unfavorable. Our results suggest that diffusion of responsibility is the primary reason for the increased antisocial behavior as our experimental design eliminates competing explanations. With a partner in crime, senders think that behaving antisocially is more acceptable and experience less guilt. Importantly, we identify a crucial condition for the increased antisocial behavior by groups: the partner in crime must actively participate in the decision-making. Our results have important implications for institutional design and promoting prosocial behaviors.
    Keywords: diffusion of responsibility, antisocial behavior, moral norms, guilt aversion
    JEL: D70 D91 C92 D63
    Date: 2017–09
  7. By: Tomás Rau; Miguel Sarzosa; Sergio S. Urzúa
    Abstract: We use sharp, massive and unexpected price increases of oral contraceptives—product of a documented case of collusion among pharmaceutical retailers in Chile—as a natural experiment to estimate the impact of access to the Pill on fertility and newborn health. Our empirical strategy combines multiple sources of information and takes into account the seasonality of conceptions and the general trends of fertility, as well as the dynamics that arise after interrupting Pill's intake. Our estimates suggest that due to the price hike, the weekly birth rate increased by 4%. We show large effects on the number of children born to unmarried mothers, from mothers in their early 20's, and to primiparae women. Moreover, we find evidence of significant deterioration of newborn health as measured by the incidence of low birthweight and infant mortality. We suggest that the “extra” conceptions faced dire conditions during gestation as a result of mothers' unhealthy behaviors. In addition, we document a disproportional increase of 27% in the weekly miscarriage and stillbirth rates, which we interpret as manifestations of active efforts of termination in a country where abortion was illegal. As the “extra” children reached school age, we find lower school enrollment rates and higher participation in programs for students with special needs. Our results suggest that access to contraceptives may prevent conceptions that will turn out to be in relatively poor health, and thereby may improve the average health of children conceived.
    JEL: I14 I15 K42 L13 L4 L41
    Date: 2017–10
  8. By: Yassine Lefouili (Toulouse School of Economics, university of Toulouse Capitole, Toulouse, France.); Joana Pinho (Catolica Porto Business School and CEF.UP, Universidade do Porto, Porto, Portugal.)
    Abstract: This paper explores the incentives for, and the effects of, collusion in prices between two-sided platforms. We characterize the most profitable sustainable agreement when platforms collude on both sides of the market and when they collude on a single side of the market. Under two-sided collusion, prices on both sides are higher than competitive prices, implying that agents on both sides become worse off as compared to the competitive outcome. An increase in cross-group externalities makes two-sided collusion at a given profit level harder to sustain, and reduces the harm from collusion suffered by the agents on a given side as long as the collusive price on that side is lower than the monopoly price. When platforms collude on a single side of the market, the price on the collusive side is lower (higher) than the competitive price if the magnitude of the cross-group externalities exerted on that side is sufficiently large (small). As a result, one-sided collusion may benefit the agents on the collusive side and harm the agents on the competitive side.
    Keywords: collusion; two-sided markets; cross-group externalities.
    JEL: L41 D43
    Date: 2017–09
  9. By: Gallier, Carlo
    Abstract: I investigate if, how, and why the effect of a contribution rule in a public goods game depends on how it is implemented: endogenously chosen or externally imposed. The rule prescribes full contributions to the public good backed by a nondeterrent sanction for those who do not comply. My experimental design allows me to disentangle to what extent the effect of the contribution rule under democracy is driven by self-selection of treatments, information transmitted via the outcome of the referendum, and democracy per se. In case treatments are endogenously chosen via a democratic decision-making process, the contribution rule significantly increases contributions to the public good. However, democratic participation does not affect participants' contribution behavior directly, after controlling for self-selection of treatments and the information transmitted by voting.
    Keywords: laboratory experiment,public good,democracy,endogenous institutions,voting,contribution rule,compliance
    JEL: C91 D02 D72 K42
    Date: 2017
  10. By: Cesare Righi; Timothy Simcoe
    Abstract: We study the matching of patent applications to examiners at the U.S. Patent and Trademark Office. Using test statistics originally developed to identify industry agglomeration, we find strong evidence that examiners specialize in particular technologies, even within relatively homogeneous art units. Examiner specialization is more pronounced in the biotechnology and chemistry fields, and less in computers and software. Evidence of specialization becomes weaker, but does not completely disappear, if we condition on technology sub-classes. There is no evidence that certain examiners specialize in applications that have greater importance or broader claims. More specialized examiners have a lower grant rate and produce a larger narrowing of claim-scope during the examination process. We discuss implications for instrumental variables based on examiner characteristics.
    JEL: H83 K11 L98 O3 O34
    Date: 2017–10
  11. By: Magdalena Helfrich; Fabian Herweg
    Abstract: We provide an explanation for a frequently observed vertical restraint in ecommerce, namely that brand manufacturers partially or completely prohibit that retailers distribute their high-quality products over the internet. Our analysis is based on the assumption that a consumer’s purchasing decision is distorted by salient thinking, i.e. by the fact that he overvalues a product attribute - quality or price - that stands out in a particular choice situation. In a highly competitive low-price environment like on an online platform, consumers focus more on price rather than quality. Especially if the market power of local (physical) retailers is low, price tends to be salient also in the local store, which is unfavorable for the high-quality product and limits the wholesale price a brand manufacturer can charge. If, however, the branded product is not available online, a retailer can charge a significant markup on the high-quality good. As the markup is higher if quality rather than price is salient in the store, this aligns the retailer’s incentives with the brand manufacturer’s interest to make quality the salient attribute and allows the manufacturer to charge a higher wholesale price. We also show that, the weaker are consumers’ preferences for purchasing in the physical store and the stronger their salience bias, the more likely it is that a brand manufacturer wants to restrict online sales. Moreover, we find that a ban on distribution systems that prohibit internet sales increases consumer welfare and total welfare, because it leads to lower prices for final consumers and prevents inefficient online sales.
    Keywords: internet competition, relative thinking, retailing, salience, selective distribution
    JEL: D43 K21 L42
    Date: 2017
  12. By: Zhou, Haiwen
    Abstract: The Confucianism school emphasizes family value, moral persuasions, and personal relations. Under Confucianism, there is a free-rider issue in the provision of efforts. Since national officials are chosen through personal relations, they may not be the most capable. The Legalism school emphasizes the usage of incentives and formal institutions. Under the Legalism, the ruler provides strong incentives to local officials which may lead to side effects because some activities are noncontractible. The cold-blood image of the Legalism may alien citizens. By exploiting the paternalistic relationship between the ruler and the ruled under Confucianism and the strength of institution-building under the Legalism, the ruler may benefit from a combination of Confucianism approach and the Legalism approach as the national strategy of governance. As each strategy has its pros and cons, which strategy of is optimal depends on factors such as the minimum enforceable level of public service and the level of institution building costs.
    Keywords: Confucianism, Legalism, national strategy of governance, ancient China, incentive provision, culture
    JEL: A10 H10 N45
    Date: 2017–10–13

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