nep-law New Economics Papers
on Law and Economics
Issue of 2021‒06‒14
twelve papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Should card data storage with merchants, payment aggregators and payment gateways be prohibited? By Renuka Sane; Ajay Shah; Bhargavi Zaveri
  2. Corporate Leniency in a Dynamic Context: The Preemptive Push of an Uncertain Future By Gaertner, Dennis
  3. Misdemeanor Prosecution By Amanda Agan; Jennifer Doleac; Anna Harvey
  4. Going Bankrupt in China By Bo, Li; Ponticelli, Jacopo
  5. Echoes of Violent Conflict: The Effect of the Israeli-Palestinian Conflict on Hate Crimes in the U.S. By Christensen, Love; Enlund, Jakob
  6. Platform Mergers: Lessons from a Case in the Digital TV Market By Ivaldi, Marc; Zhang, Jiekai
  7. Privacy Protection, Security, and Consumer Retention By Jullien, Bruno; Lefouili, Yassine; Riordan, Michael
  8. Strict Liability, Scarce Generic Input and Duopoly Competition By Gérard Mondello
  9. Do Bankruptcy Protection Levels Affect Households' Demand for Stocks? By Mariela Dal Borgo
  10. Mergers with Differentiated Products: Where do we Stand? By Valletti, Tommaso; Zenger, Hans
  11. Not all that glitters is gold: political stability and trade in Sub-Saharan Africa By Simplice A. Asongu; Thales P. Yapatake Kossele; Joseph Nnanna
  12. Climate Neutral Production, Free Allocation of Allowances under Emissions Trading Systems, and the WTO: How to Secure Compatibility with the ASCM By Roland Ismer; Harro van Asselt; Jennifer Haverkamp; Michael Mehling; Karsten Neuhoff; Alice Pirlot

  1. By: Renuka Sane (NIPFP); Ajay Shah (xKDR Forum and Jindal Global University); Bhargavi Zaveri (xKDR Forum)
    Abstract: In March 2020, the Reserve Bank of India's guidelines on Payment Aggregators and Payment Gateways prohibited merchants from storing data on cards used by customers. This paper argues that a total prohibition on card data storage is problematic as it affects the ease of transactions for consumers, and effectively tilts consumer preference towards other payment instruments. This runs the risk of technological choices in the industry being made or substantially shaped by the regulator. The documents released lack a cost-benefit analysis of this prohibition and do not demonstrate that the chosen intervention is the best one. This raises concerns in the light of emerging Indian jurisprudence on the standards of regulatory governance to be met by statutory regulatory agencies. We show alternative approaches to address concerns relating data breaches of card information stored by consumers on websites. These include better security standards, tokenisation, and liability frameworks.
    JEL: H83 K22 K23
    Date: 2021–05
  2. By: Gaertner, Dennis
    Abstract: This paper investigates how leniency programs can induce collusive offenders to self report in a dynamic setting, where the risk of independent detection evolves stochastically over time. We show how this uncertainty about the future can push firms into preemptive application, and how these preemptive incentives may unravel to the point where firms apply long before the risk of independent detection is in any way imminent. The analysis sheds light on factors and policy instruments which favor such an unraveling effect. These include: little discontinuity in time and state, firms’ patience, and a relatively harsh treatment of firms which fail to preempt others. In contrast, the described effects do not necessarily require a very high absolute level of leniency reduction, or even rewards.
    Keywords: cartel, collusion, leniency program, preemption, dynamics
    JEL: D43 D84 K21 K42 L41
    Date: 2021–06
  3. By: Amanda Agan (Rutgers University); Jennifer Doleac (Texas A&M University); Anna Harvey (New York University)
    Abstract: Communities across the United States are reconsidering the public safety benefits of prosecuting nonviolent misdemeanor offenses. So far there has been little empirical evidence to inform policy in this area. In this paper we report the first estimates of the causal effects of misdemeanor prosecution on defendants' subsequent criminal justice involvement. We leverage the as-if random assignment of nonviolent misdemeanor cases to Assistant District Attorneys (ADAs) who decide whether a case should move forward with prosecution in the Suffolk County District Attorney's Office in Massachusetts. These ADAs vary in the average leniency of their prosecution decisions. We find that, for the marginal defendant, nonprosecution of a nonviolent misdemeanor offense leads to large reductions in the likelihood of a new criminal complaint over the next two years. These local average treatment effects are largest for first-time defendants, suggesting that averting initial entry into the criminal justice system has the greatest benefits. We also present evidence that a recent policy change in Suffolk County imposing a presumption of nonprosecution for a set of nonviolent misdemeanor offenses had similar beneficial effects: the likelihood of future criminal justice involvement fell, with no apparent increase in local crime rates.
    Keywords: nonviolent misdemeanors, local average treatment effect, crime rates
    JEL: K14 K42 J24
    Date: 2021–04
  4. By: Bo, Li; Ponticelli, Jacopo
    Abstract: Using new case-level data we document a set of stylized facts on bankruptcy in China and study how the staggered introduction of specialized courts across Chinese cities affected insolvency resolution and the local economy. For identification, we compare cases handled by specialized versus traditional civil courts within the same city. Specialized courts hire better-trained judges and cut case duration by 35%. State-owned firms experience larger declines in case duration relative to privately-owned firms, consistent with higher judicial independence. Cities introducing specialized courts experience faster firm entry, larger increase in average capital productivity and reallocation of employment out of "zombie" firms-intensive sectors.
    Keywords: Court efficiency; Political influence; Specialized Courts; Zombie firms
    JEL: G33 K22 O16
    Date: 2020–07
  5. By: Christensen, Love (Department of Political Science, University of Gothenburg); Enlund, Jakob (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Do social identity ties facilitate the spread of violent conflict? We assess whether the Israeli-Palestinian conflict causes hate crime towards Jews and Muslims in the U.S using daily data between 2000-2016. We measure the timing, intensity and instigator in the conflict using the number of conflict fatalities and U.S. mass media coverage of the conflict. Analyses using both conflict measures find that conflict events trigger hate crimes in the following days following a retaliatory pattern: Anti-Jewish hate crimes increase after Israeli attacks and anti-Islamic hate crimes increase after Palestinian attacks. There is little evidence that the ethno-religiousgroup not associated with the attacker is subjected to hate crimes. Moreover, the lack of an effect of non-violent conflict reporting suggests that hate crimes are not triggered by the salience of the Israeli-Palestinian conflict in itself. Our findings suggest that victimization transcends the locality of the conflict, implying that violent conflict may be more costly than existing research suggests.
    Keywords: Conflict; Hate crime; Violence; Israel; Palestine; Media
    JEL: D74 J15 K42 L82
    Date: 2021–05
  6. By: Ivaldi, Marc; Zhang, Jiekai
    Abstract: This paper contributes to the analysis of mergers in two-sided markets, notably those in which a platform provides its service for free on one side but obtains all its revenues from the other, as in the digital TV industry. Specifically, we assess a decision of the French competition authority which approved the merger of the broadcasting services of the TV channels involved but imposed a behavioral remedy prohibiting the merger of their respective advertising sales services. To do so, we build a structural model allowing for multi-homing of advertisers and, using a comprehensive dataset, we estimate the demand of viewers and advertisers. Our evaluation provides evidence that the remedy has been ineffective at limiting the increase in prices and amounts of advertising, due to the cross-side externalities between viewers and advertisers. Without resulting in significant positive effects on the viewers' surplus, the remedy has also drastically increased the advertisers' total cost. Nevertheless, the remedy has benefited the competitors of the merging channels. The main lesson of our analysis is that, in the process of designing competition or regulatory policy for two-sided markets, ignoring the interaction between the two sides of platforms can result in unexpected outcomes.
    Keywords: advertising; competition policy; platform merger; TV market; two-sided market
    JEL: K21 L10 L40 L82 M37
    Date: 2020–06
  7. By: Jullien, Bruno; Lefouili, Yassine; Riordan, Michael
    Abstract: A website monetizes information it collects about its customers by charging third parties for targeted access to them. Allowing for third parties who are well-intentioned, a nuisance, or even malicious, the resulting consumer experiences might be good, bad, or neutral. As consumers learn from experience, the website especially risks losing those customers who suffer a bad experience. Customer retention thus motivates the website to be cautious about monetization, or to spend resources to screen third parties. We study the website's equilibrium privacy policy, its welfare properties, competition in the market for information, and the impact of regulations improving transparency and consumer control.
    Keywords: Consumer Retention; Personal Data; Privacy Policy; regulation
    JEL: D83 L15 L51
    Date: 2020–07
  8. By: Gérard Mondello (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: This paper analyzes the impact of strict liability on imperfect competition and shows first that it is not an obstacle to achieving a socially optimal level of care. Second, this result is compromised when firms face a scarce generic asset. Under this asset limitation, this paper shows that competition (here a Cournot-Nash duopoly) leads to a lower level of prevention even if more product at lower price is supplied at the equilibrium. Introducing standards linked to operating permits improves the economy's safety level but may lead firms to exit.
    Keywords: Tort Law, Strict Liability, Negligence Rule, Imperfect Competition, Oligopoly, Cournot Competition
    JEL: D43 L13 L52 K13
    Date: 2021–05
  9. By: Mariela Dal Borgo
    Abstract: This paper examines empirically the effect of the level of personal bankruptcy protection in the US on households' demand for financial assets. A Chapter 7 bankruptcy allows protecting the home equity up to a certain limit or "exemption". Previous literature shows that such exemption biases investment towards home equity. This paper tests whether it also lowers investment in stocks, which are not protected in bankruptcy. Using an instrumental variable approach, I estimate a lower stock market participation when the home equity is below the exemption, but the result is not robust, and households at higher risk of bankruptcy do not exhibit a stronger response. Moreover, investment in home equity is not higher when the home is fully protected. These findings suggest no substantial portfolio distortions from the level of home equity that is protected in bankruptcy.
    JEL: D14 G00 G11 K35
    Date: 2021–05
  10. By: Valletti, Tommaso; Zenger, Hans
    Abstract: On the occasion of the 10th anniversary of the 2010 U.S. Horizontal Merger Guidelines, this article provides an overview of the state of economic analysis of unilateral effects in mergers with differentiated products. Drawing on our experience with merger enforcement in Europe, we discuss both static and dynamic competition, with a special emphasis on the calibration of competitive effects. We also discuss the role of market shares and structural presumptions in differentiated product markets.
    Keywords: differentiated products; mergers; Unilateral Effects
    JEL: L11 L13 L40 L41
    Date: 2020–07
  11. By: Simplice A. Asongu (CEREDEC, Bangui, CAR); Thales P. Yapatake Kossele (CEREDEC, Bangui, CAR); Joseph Nnanna (Abuja, Nigeria)
    Abstract: This study examines linkages between political stability and trade openness dynamics in a panel of 44 countries in SSA from 1996 to 2016. The empirical evidence is based on the generalized method of moments. From the findings, the negative relationship between political stability and merchandise trade is not significant while the negative relationship between political stability and trade openness (exports plus imports) is significant. Hence, the findings do not validate the tested hypothesis that political stability/no violence increases trade in the sub-region. The perspective that some forms of political stability can slow down and prevent international trade is consistent with Oslon in Rise and Decline of Nations (RADON) and recent contributions to the economic development literature which have shown that not all forms of political stability are development friendly because much depends on the extent to which stability translates into, inter alia, good governance. The principal policy implication is that standards of political governance need to be boosted in order to improve the anticipated effects of political stability on trade, especially in the light of the ambitious African Continental Free Trade Area (AfCFTA). Other policy implications are discussed.
    Keywords: Political Stability; Trade; Sub-Saharan Africa
    JEL: F52 K42 O17 O55 P16
    Date: 2021–01
  12. By: Roland Ismer; Harro van Asselt; Jennifer Haverkamp; Michael Mehling; Karsten Neuhoff; Alice Pirlot
    Abstract: To reach climate neutrality, carbon emissions from the production of basic materials need to be significantly reduced. For governments’ support measures to be consistent with their World Trade Organization obligations, they need to be compatible with the WTO’s Agreement on Subsidies and Countervailing Measures (ASCM). This paper analyzes the ASCM consistency of three selected support schemes, namely: (1) free allocation under emissions trading systems such as the European Union Emissions Trading System (EU ETS) to operators of installations deemed to be at significant risk of carbon leakage; (2) a combination of a charge on carbon-intensive materials with free allocation; and (3) carbon contracts for differences (CCfDs) for operators of climate-neutral installations, in which governments pay out the incremental costs of climate neutral-production processes relative to the costs of conventional primary material production. The analysis reveals that the current system of carbon leakage protection through free allocation is vulnerable to challenges under the ASCM. By contrast, a transition to a combination of free allocation and a charge on carbon-intensive materials would implement consistent carbon-pricing and thus would very likely not amount to a subsidy under the ASCM. In a similar vein, support for climate-neutral installations through CCfDs could be designed in such a way that it confers no benefit, so that it would also not constitute a subsidy.
    Keywords: WTO, ASCM, Carbon Pricing, Free allowance allocation, Climate Contribution, Carbon Contracts for Difference
    JEL: K32 F13 Q54 Q56
    Date: 2021

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