nep-law New Economics Papers
on Law and Economics
Issue of 2020‒09‒21
eleven papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The effect of patent litigation insurance: Theory and evidence from NPEs By Ganglmair, Bernhard; Helmers, Christian; Love, Brian J.
  2. Restrictions on Privacy and Exploitation in the Digital Economy: A Market Failure Perspective By Nicholas Economides; Ioannis Lianos
  3. Should environment be a concern for competition policy when firms face environmental liability ? By Eric Langlais; Maxime Charreire
  4. Racial Disparities in Motor Vehicle Searches Cannot Be Justified by Efficiency By Benjamin Feigenberg; Conrad Miller
  5. Comparative Effects of Recreational and Medical Marijuana Laws On Drug Use Among Adults and Adolescents By Hollingsworth, Alex; Wing, Coady; Bradford, Ashley
  6. Fee Equalization and Appropriate Health Care By Emilia Barili; Paola Bertoli; Veronica Grembi
  7. Dismissal protection and long-term sickness absence: First evidence from Germany By Gürtzgen, Nicole; Hiesinger, Karolin
  8. The Impact of Sodomy Law Repeals on Crime By Riccardo Ciacci; Dario Sansone
  9. Discrimination against foreigners in the U.S. patent system By Gaetan de Rassenfosse; Reza Hosseini
  10. Enforcement against Organized Crime Fosters Illegal Markets: Evidence from the Yakuza By Hoshino, Tetsuya; Kamada, Takuma
  11. Auditors’ negligence and professional misconduct in India: a struggle for a consistent legal standard By Ram Mohan, M.P.; Raj, Vishakha

  1. By: Ganglmair, Bernhard; Helmers, Christian; Love, Brian J.
    Abstract: We analyze the extent to which private defensive litigation insurance deters patent assertion by non-practicing entities (NPEs). We study the effect that a patent-specific defensive insurance product, offered by a leading litigation insurer, had on the litigation behavior of insured patents' owners, all of which are NPEs. We first model the impact of defensive litigation insurance on the behavior of patent enforcers and accused infringers. We show that the availability of defensive litigation insurance can have an effect on how often patent enforcers will assert their patents. We confirm this result empirically showing that the insurance policy had a large, negative effect on the likelihood that a patent included in the policy was subsequently asserted relative to other patents held by the same NPEs and relative to patents held by other NPEs with portfolios that were entirely excluded from the insurance product. Our findings suggest that market-based mechanisms can deter so-called "patent trolling."
    Keywords: NPEs,patents,insurance,litigation
    JEL: G22 K41 O34
    Date: 2020
  2. By: Nicholas Economides (Professor of Economics, NYU Stern School of Business, New York, New York 10012); Ioannis Lianos (Professor of Global Competition Law and Public Policy, Faculty of Laws, University College London, and Hellenic Competition Commission)
    Abstract: We discuss how the acquisition of private information by default without compensation by digital platforms such as Google and Facebook creates a market failure and can be grounds for antitrust enforcement. To avoid the market failure, the default in the collection of personal information has to be changed by law to “opt-out.” This would allow the creation of a vibrant market for the sale of users’ personal information to digital platforms. Assuming that all parties are perfectly informed, users are better off in this functioning market and digital platforms are worse off compared to the default opt-in. However, just switching to a default opt-in will not restore competition to the but for world because of the immense market power and bargaining power towards an individual user that digital platforms have acquired. Digital platforms can use this power to reduce the compensation that a user would receive for his/her personal information compared to a competitive world. Additionally, it is likely that the digital platforms are much better informed than the user in this market, and can use this information to disadvantage users in the market for personal information.
    Keywords: personal information; Internet search; Google; Facebook; digital; privacy; restrictions of competition; exploitation; market failure; hold up; merger; abuse of a dominant position; unfair commercial practices; excessive data extraction; self-determination; behavioral manipulation; remedies; portability; opt-in; opt-out.
    JEL: K21 L1 L12 L4 L41 L5 L86 L88
    Date: 2020–09
  3. By: Eric Langlais; Maxime Charreire
    Abstract: This paper considers an oligopoly where firms produce a joint and indivisible environmental harm as a by-product of their output. We first analyze the effects on the oligopoly equilibrium of alternative designs in environmental liability law, secondly, we discuss the rationale for "non-conventional" competition policies, i.e. more concerned with public interest such as the preservation of human health or environment. We study firms decisions of care and output under various liability regimes (strict liability vs negligence) associated with alternative damages apportionment rules (per capita vs market share rule), and with damages multipliers. We find that basing an environmental liability law on the combination of strict liability, the per capita rule, and an "optimal" damages multiplier, is consistent with a conservative competition policy, focused on consumers surplus, since, weakening firms' market power also increases aggregate expenditures in environment preservation and social welfare. In contrast, a shift to the market share rule, or to a negligence regime, may be consistent with a restriction of competition, since firms' entry may instead lead to a decrease in aggregate environmental expenditures and losses of social welfare. Nevertheless the fine tuning of the policy requires specific information from a Competition Authority, which we discuss as well.
    Keywords: Strict liability; negligence; damages apportionment rules; market share liability; environmental liability; Cournot oligopoly; competition policy.
    JEL: L41 L13 K13
    Date: 2020
  4. By: Benjamin Feigenberg; Conrad Miller
    Abstract: During traffic stops, police search black and Hispanic motorists more often than white motorists, yet those searches are equally or less likely to yield contraband. We ask whether equalizing search rates by motorist race would reduce contraband yield. We use unique administrative data from Texas to isolate variation in search behavior across highway patrol troopers and find that, across troopers, search rates are unrelated to the proportion of searches that yield contraband. Our results imply that, in partial equilibrium, troopers can equalize search rates across racial groups, maintain the status quo search rate, and increase contraband yield.
    JEL: J15 K42
    Date: 2020–08
  5. By: Hollingsworth, Alex; Wing, Coady; Bradford, Ashley
    Abstract: Thirty-four states have adopted medical marijuana laws and ten states have adopted recreational marijuana laws. There is little research comparing how these two types of laws affect drug consumption of the general US population. Using a difference in difference strategy, we find that recreational laws increase past-year marijuana use by 25% among adults and by 10% among adolescents. In contrast, medical laws increase adult use by only 5% and have a negligible effect on adolescent use. We also find that recreational marijuana dispensaries are an important driver of the increase in marijuana use for adults 26 and over. Taken together, our results suggest that medical laws are not de facto recreational laws in that they succeed in mitigating recreational use, that recreational laws have broad effects on overall levels of marijuana use, and that underage marijuana use may be an important problem with existing implementations of recreational marijuana laws.
    Date: 2020–08–19
  6. By: Emilia Barili; Paola Bertoli; Veronica Grembi
    Abstract: Fee equalization in health care brings under a unique tariff several medical treatments, coded under different Diagnosis Related Groups (DRGs). The aim is to improve healthcare quality and efficiency by discouraging unnecessary, but better-paid, treatments. We evaluate its effectiveness on childbirth procedures to reduce overuse of c-sections by equalizing the DRGs for vaginal and cesarean deliveries. Using data from Italy and a difference-in-differences approach, we show that setting an equal fee decreased c-sections by 2.5%. This improved the appropriateness of medical decisions, with more low-risk mothers delivering naturally and no significant changes in the incidence of complications for vaginal deliveries. Our analysis supports the effectiveness of fee equalization in avoiding c-sections, but highlights the marginal role of financial incentives in driving c-section overuse. The observed drop was only temporary and in about a year the use of C-section went back to the initial level. We found a greater reduction in lower quality, more capacity-constrained hospitals. Moreover, the effect is driven by districts where the availability of Ob-Gyn specialists is higher and where women are predominant in the gender composition of Ob-Gyn specialists.
    Keywords: fee equalization, Cesarean sections, difference in differences;
    JEL: K13 K32 I13
    Date: 2020–08
  7. By: Gürtzgen, Nicole; Hiesinger, Karolin
    Abstract: This paper analyses the causal effects of weaker dismissal protection on the incidence of long-term sickness (> six weeks). We exploit a German policy change, which shifted the threshold exempting small establishments from dismissal protection from five to ten workers. Using administrative data, we find a significantly negative reform effect on transitions into long-term sickness in the second year after a worker has entered an establishment. This response is due to a behavioural, rather than a compositional effect and is particularly pronounced among medium-skilled males. Our results further indicate that the reform did not alter the probability of involuntary unemployment after sickness.
    Keywords: dismissal protection,long-term sickness,involuntary unemployment,difference-in-differences,administrative data,small establishments
    JEL: D02 I12 J28 J38 J88 J63 K31
    Date: 2020
  8. By: Riccardo Ciacci; Dario Sansone
    Abstract: We exploit variation in the timing of decriminalization of same-sex sexual intercourse across U.S. states to estimate the impact of these law changes on crime through difference-in-difference and event-study models. We provide the first evidence that sodomy law repeals led to a decline in the number of arrests for disorderly conduct, prostitution, and other sex offenses. Furthermore, we show that these repeals led to a reduction in arrests for drug and alcohol consumption.
    Date: 2020–08
  9. By: Gaetan de Rassenfosse (Ecole polytechnique federale de Lausanne); Reza Hosseini (Ecole polytechnique federale de Lausanne)
    Abstract: Inventions of foreign origin are about ten percentage points less likely to be granted a U.S. patent than domestic inventions. An empirical analysis of 1.5 million U.S. patent applications identifies three systematic differences between foreign and domestic patent applications that partly explain this bias. They include differences in patent agents, the financial resources of the applicants, and the level of effort that applicants put into the prosecution process. We find no evidence of disparate treatment (‘intentional discrimination’) of foreigners. Instead, our evidence points to a disparate impact (‘unintentional discrimination’) of the U.S. patent system on foreign inventors. Our results suggest unequal access to the patent system for foreigners compared to locals (but also for small U.S. firms). Giving examiners the power of (truly) rejecting a patent application may be one solution to level the playing field between foreigners and locals, but also between large and small firms.
    Keywords: foreign bias; discrimination; disparate impact; national treatment principle; patent system
    JEL: O34 K11 F52
    Date: 2020–09
  10. By: Hoshino, Tetsuya; Kamada, Takuma
    Abstract: The Yakuza Exclusion Ordinances (YEOs) have been implemented at different times across prefectures in Japan, where it is not illegal to organize or join criminal organizations—the yakuza. The YEOs indirectly regulate on the yakuza by prohibiting non-yakuza citizens from providing any benefit to them. In Japan, organized fraud has been a serious issue, accounting for almost half of the total financial damage by all property crimes. Difference-in-differences estimates indicate that (i) the YEOs increase the revenue from organized fraud and (ii) the YEOs’ effects are greater in regions with lower concentration levels of yakuza syndicates. Additional evidence suggests that both current and former yakuza members engage in the fraud in the presence of the YEOs. One policy implication is that the rehabilitation assistance for former yakuza members can be effectively implemented in regions with lower concentration of yakuza syndicates.
    Date: 2020–08–16
  11. By: Ram Mohan, M.P.; Raj, Vishakha
    Abstract: Gross negligence is a severe form of negligence. Its severity has been characterized using the presence of a mental element or mens rea accompanying the negligent act. Within the context of professional negligence, gross negligence is important as it constitutes professional misconduct. For auditors, a finding of professional misconduct through disciplinary proceedings can result in suspension or expulsion from the profession. The Securities and Exchange Board of India also uses this concept to determine whether an auditor has violated any securities regulations. Given the implications of a finding of gross negligence on the practice of an auditor, this paper seeks to examine the legal standard in detail. The paper examines all reported High Court decisions from 1950s till 2019 and finds that the standards applied by the High Courts have been inconsistent. In the absence of any precedent from the Supreme Court of India that details what comprises gross negligence in the context of auditors, the inconsistent approach of the High Courts poses a problem. The Supreme Court decision in the P.K. Mukherjee case (1968) dealt with an auditor’s misconduct, however, it did not examine the question of gross negligence. This paper offers a starting point for a discussion to minimize the uncertainty currently associated with auditors’ liability for professional misconduct, especially hoping to assist the newly established the National Financial Reporting Authority in its decision-making process.
    Date: 2020–09–14

This nep-law issue is ©2020 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.
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