nep-law New Economics Papers
on Law and Economics
Issue of 2019‒05‒20
eight papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Private Protection and Public Policing By Ross Hickey; Steeve Mongrain; Joanne Roberts; Tanguy van Ypersele
  2. Can Blockchain Solve the Hold-up Problem in Contracts? By Richard T. Holden; Anup Malani
  3. Marital Property Laws and Women’s Labour Supply By Stephanie Lluis; Yazhuo (Annie) Pan
  4. Normative Perception of Power Abuse By Leonard Hoeft; Wladislaw Mill; Alexander Vostroknutov
  5. The importance of Punishment Substitutability in Criminometric Studies By Eugene Braslavskiy; Firmin Doko Tchatoka; Virginie Masson
  6. Credence goods markets and the informational value of new media: A natural field experiment By Rudolf Kerschbamer; Daniel Neururer; Matthias Sutter
  7. Working Paper 09-18 - Economic impact of professional services reform in Belgium - A DSGE simulation By Chantal Kegels; Dirk Verwerft
  8. Avoiding a “No Deal” Scenario: Free Trade Agreements, Citizenship and Economic Rights By Ojo, Marianne

  1. By: Ross Hickey (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne); Steeve Mongrain (Simon Fraser University); Joanne Roberts (Yale-NUS); Tanguy van Ypersele (Aix-Marseille University – AMSE)
    Abstract: This paper looks carefully at situations in which public and private protection are complementary, that is, when private protection must be coordinated with public protection to be effective. For example, home alarms deter theft by being connected to a local police station: if the police do not respond to a home alarm, the home alarm on its own is virtually useless in halting a crime in action. We make a distinction between gross and net complementarity and substitution, where the latter takes into account the effect on the crime rate. We show that when public and private protection are complements the optimal provision of public protection trades offs the manipulation effect of encouraging private protection with the compensatory effect of providing protection to households that do not privately invest. We discuss the implications of our results for policy and empirical research in this area.
    Keywords: crime, private protection, policing, externalities
    JEL: H41 H42 K42
    Date: 2019–03
  2. By: Richard T. Holden; Anup Malani
    Abstract: Two parties sign a contract but before they fully perform they modify the contract. Should courts enforce the modified agreement? The modification may enable efficient trade in response to changed circumstances, or one party may have made an efficient relationship-specific investment and then been held-up by the other. Courts have had difficulty tackling this problem because the facts required to discriminate between the two situations are non-verifiable. A private remedy is for the parties to write a contract that is robust to hold-up or that makes the facts relevant to modification verifiable. But implementing such remedies requires commitment to the provisions, i.e., they themselves are subject to non-compliance. Conventional contract technology, e.g., the use of liquidated damages, to ensure commitment are disfavored by courts and subject to renegotiation. Smart contracts written on blockchain ledgers may offer a solution. We explain the basic economics of these technologies. We argue that they can used to implement liquidated damages without court involvement and thereby obtain commitment to renegotiation design and revelation mechanisms. We address the hurdles courts may impose to use of smart contracts and argue that sophisticated parties’ ex ante commitment to them may lead courts to allow their use as pre-commitment devices.
    JEL: D82 D86 K12
    Date: 2019–05
  3. By: Stephanie Lluis (Department of Economics, University of Waterloo); Yazhuo (Annie) Pan (Department of Economics, University of Waterloo)
    Abstract: In this paper, we study whether and if so how changes in the marital property law following the amendment of the Civil Code of Quebec to improve economic equality between spouses impacted household labour supply and individuals' marital decisions. We exploit detailed information on individuals' labour market and marital status from the Labour Force Survey to analyze short-term changes in labour supply and marital decisions before and after the reforms in Quebec relative to other provinces, which did not experience the changes in the marital property law over that time period. Investigating the labour supply and marital decisions' responses to a policy changing the distribution of resources between men and women may assist welfare agencies in the design of family reforms and more generally, help further reduce women's entry into poverty. Furthermore, analyzing whether the Quebec marital property law changed the demographic mix of couples may further inform policymaker about possible ways to improve gender equality.
    JEL: C21 H75 J12 J22
    Date: 2018–11–12
  4. By: Leonard Hoeft (Max Planck Institute for Research on Collective Goods); Wladislaw Mill (University of Mannheim); Alexander Vostroknutov (Maastricht University)
    Abstract: We study how the powerful perceive power abuse, and how negative experience related to it influences the appropriateness judgments of the powerless. We create an environment conducive to unfair exploitation in a repeated Public Goods game where one player (punisher) is given a further ability to costlessly subtract money from others (victims). Punishers who abuse their power rationalize their behavior by believing that free-riding, while forcing others to contribute, is not inappropriate. More importantly, victims of such abuse also start to believe that punishers’ free-riding and punishment are justifiable. Our findings demonstrate the capacity of humans to exculpate abusive behavior.
    Keywords: power abuse, norms, public goods, punishment
    JEL: C91 C92 K42 H41 D73
    Date: 2019–03
  5. By: Eugene Braslavskiy (School of Economics, University of Adelaide); Firmin Doko Tchatoka (School of Economics, University of Adelaide); Virginie Masson (School of Economics, University of Adelaide)
    Abstract: This study investigates the role of punishment substitutability in the empirical estimation of the economic model of crime. Using a dynamic panel data model fitted to a panel of Local Government Areas in New South Wales, Australia, we evaluate the effects of financial penalties and imprisonment on the crime rate. Our results show that crime is clearly a dynamic phenomenon, and that failure to incorporate both financial penalties and imprisonment can lead to a misspecfied model. Furthermore, our results vary signifcantly for different crime categories, highlighting the importance of analysing specific crime categories separately.
    Keywords: crime, deterrence, punishment, panel data, aggregation bias
    JEL: K14 C23 C26 C51
    Date: 2019–02
  6. By: Rudolf Kerschbamer (University of Innsbruck); Daniel Neururer (University of Innsbruck); Matthias Sutter (Max Planck Institute for Research on Collective Goods)
    Abstract: Credence goods markets are characterized by pronounced informational asymmetries between consumers and expert sellers. As a consequence, consumers are often exploited and market efficiency is threatened. However, in the digital age, it has become easy and cheap for consumers to self-diagnose their needs using specialized webpages or to access other consumers’ reviews on social media platforms in search for trustworthy sellers. We present a natural field experiment that examines the causal effect of information acquisition from new media on the level of sellers’ price charges for computer repairs. We find that even a correct self-diagnosis of a consumer about the appropriate repair does not reduce prices, and that an incorrect diagnosis more than doubles them. Internet ratings of repair shops are a good predictor of prices. However, the predictive valued of reviews depends on whether they are judged as reliable or not. For reviews recommended by the platform Yelp we find that good ratings are associated with lower prices and bad ratings with higher prices, while non-recommended reviews have a clearly misleading effect, because non-recommended positive ratings increase the price.
    Keywords: credence goods, fraud, information acquisition, internet, field experiment
    JEL: C93 D82
    Date: 2019–03
  7. By: Chantal Kegels; Dirk Verwerft
    Abstract: This working paper analyses the economic impact of a regulated professional services reform in Belgium through simulations based on the European Commission's DSGE model QUEST III R&D
    JEL: D24 E17 K23 L11
    Date: 2018–06–30
  8. By: Ojo, Marianne
    Abstract: Whilst the legal and economic challenges presented by Brexit are gradually becoming more evident, observations and recommendations are already being drawn from consequences of a “ no deal scenario” and particularly the possibilities of entering into a variant of a Free Trade Agreement which should, prevent a “no deal” situation. Such a Free Trade Agreement existing between the current 28 EU Member States and the three EEA European Free Trade Association (EFTA) States Iceland, Liechtenstein and Norway (EEA Internal Market) This paper, amongst other objectives, is aimed at highlighting such proposals which have been put forward to avert a “no deal scenario”. It is obvious that change – and more specifically, fundamental legislative, regulatory overhauls, will require not only the incorporation of expertise from different fields, but also time consuming and costly resources to address the demands of the transitional and implementation periods of such legislatively transformed landscapes. Certainly, a gradual process of incorporating and adapting to new regulatory and legislative changes and environments – and particularly in respect of economically sensitive related matters, would require not only thorough and dedicated observatory and monitoring periods, but also one which facilitates and encourages a process of greater democratic accountability and transparency to be incorporated into the legislative processes. Even though Brexit has generated a great degree of economic uncertainty – which has in turn presented challenges – as well as consequences, it also presents opportunities for new actors to engage and influence vital decision making aspects in areas which particularly revolve around information technology, sustainable development, innovation – as well hybrid financial instruments and volatile mediums which are embodied and personified by crypto currencies, derivatives and other complex financial instruments and mediums of exchange - all of which are reflective of a rapidly changing and evolving financial environment. The challenges now involve to a larger extent, the manner and the degree of relevance to which vital and dominating actors and institutions will be accurately represented and impact future legislation – particularly those which focus around issues relating to trade, environment and sustainable development policies.
    Keywords: financial services; Brexit; Information Technology; innovation; e commerce; sustainability; GATS
    JEL: F1 F16 F18 G1 G14 G18 G3 K2
    Date: 2019–05

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