nep-law New Economics Papers
on Law and Economics
Issue of 2021‒08‒23
ten papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. The concentration of digital markets: How to preserve the conditions for effective and undistorted competition? By Frédéric Marty
  2. The Right to Repair: Patent Law and 3D Printing in Australia By Rimmer, Matthew
  3. Of hired guns and ideologues: why would a law firm ever retain an honest expert witness? By Martin Richardson
  4. Two sides of the same coin or two different coins? Exploring the duality of corruption in Latin America By Ella Hugo; David A. Savage; Friedrich Schneider; Benno Torgler
  5. Bankruptcy Costs and the Design of Preventive Restructuring Procedures By Epaulard Anne,; Zapha Chloé.
  6. Systemic Discrimination Among Large U.S. Employers By Patrick M. Kline; Evan K. Rose; Christopher R. Walters
  7. The First Doctrinal Consideration on "Transatlantic" Commercial Law: Tomás de Mercado’s Summa de tratos y contratos, 1569-1571 By Luisa Brunori
  8. Did the Executions of French Soldiers during the Great War Reflect Their Pacifist Views? By Olivier Guillot; Antoine Parent
  9. The Impact of Delay: Evidence from Formal Out-of-Court Restructuring By Stjepan Srhoj; Dejan Kovač; Jacob N. Shapiro; Randall Filer
  10. Fighting Collusion: An Implementation Theory Approach By Azacis, Helmuts; Vida, Peter

  1. By: Frédéric Marty
    Abstract: The policy initiatives announced on both sides of the Atlantic to complement competition rules focus on two key dimensions: the contestability of markets on the one hand and fairness in their functioning on the other. The underlying idea is that the market positions of Big Tech would be inexpugnable - insofar as high barriers to entry protect them from self-regulating competition and insofar as they would have regulatory power over their respective ecosystems. Competition for the market would no longer be free, and competition in the market would be distorted. Our purpose in this working paper is to discuss these two dimensions. Are digital markets still contestable, and is the competition in them still competition on the merits? Finally, we discuss the remedies proposed to address these two alleged phenomena. La concentration des marchés numériques : Comment préserver les conditions d'une concurrence effective pour le marché et d'une concurrence non faussée dans le marché ? Les initiatives politiques annoncées de part et d’autre de l’Atlantique pour compléter les règles de concurrence mettent l’accent sur deux dimensions essentielles : la contestabilité des marchés d’une part et la loyauté dans le fonctionnement dans leur fonctionnement d’autre part. L’idée sous-jacente est la suivante : les positions de marché des grandes entreprises du numérique seraient inexpugnables – dans la mesure où de fortes barrières à l’entrée les protègent d’un caractère auto-régulateur de la concurrence et dans la mesure où elles jouiraient d’un pouvoir de régulation sur leurs écosystèmes respectifs. La concurrence pour le marché ne serait plus libre et la concurrence dans le marché serait faussée. Notre propos dans ce document de travail est de discuter ces deux dimensions. Les marchés numériques sont-ils toujours contestables et la concurrence qui s’y exerce est-elle encore une concurrence par les mérites ? Nous discutons enfin les remèdes proposés pour répondre à ces deux phénomènes allégués.
    Keywords: contestability,fairness,loyalty,Big Tech,concentration,exclusionary abuses, contestabilité,loyauté de la concurrence,équité,Big Tech,concentration,abus d’éviction
    JEL: K21 L41
    Date: 2021–08–17
  2. By: Rimmer, Matthew (Queensland University of Technology)
    Abstract: Considering recent litigation in the Australian courts, and an inquiry by the Productivity Commission, this paper calls for patent law reform in respect of the right to repair in Australia. It provides an evaluation of the decision of the Full Court of the Federal Court in Calidad Pty Ltd v Seiko Epson Corporation [2019] FCAFC 115 – as well as the High Court of Australia consideration of the matter in Calidad Pty Ltd v Seiko Epson Corporation [2020] HCA 41. It highlights the divergence between the layers of the Australian legal system on the topic of patent law – between the judicial approach of the Federal Court of Australia and the Full Court of the Federal Court of Australia, and the endorsement of the patent exhaustion doctrine by the majority of the High Court of Australia. In light of this litigation, this paper reviews the policy approach taken by the Productivity Commission in respect of patent law, the right to repair, consumer rights, and competition policy. After the considering the findings of the Productivity Commission, it is recommended that there is a need to provide for greater recognition of the right to repair under patent law. It also calls for the use of compulsory licensing, crown use, competition oversight, and consumer law protection to reinforce the right to repair under patent law. In the spirit of modernising Australia’s regime, this paper makes a number of recommendations for patent law reform – particularly in light of 3D printing, additive manufacturing, and digital fabrication. It calls upon the legal system to embody some of the ideals, which have been embedded in the Maker’s Bill of Rights, and the iFixit Repair Manifesto. The larger argument of the paper is that there needs to be a common approach to the right to repair across the various domains of intellectual property – rather than the current fragmentary treatment of the topic.
    Date: 2021–08–09
  3. By: Martin Richardson
    Abstract: We suppose that expert witnesses are, generically, either honest in their assessment of a fact situation or are mercenary ‘hired guns’ that advocate for their retaining party. The type of a witness is known to law firms, who engage with them repeatedly, but not to courts. If the only way an honest witness can credibly reveal their type to a court is by siding with the opposing party then the question arises of why a law firm would ever retain an honest expert. We show that it can act as a signaling device in a game between the law firms to communicate private information regarding a party’s confidence in winning the case. Our results indicate, amongst other things, that the ‘English’ rule of costs allocation can make a socially desirable separating equilibrium less likely, compared to the ‘American’ rule.
    Keywords: expert witnesses, signaling, litigation
    JEL: K41 D82 C72
    Date: 2021–08
  4. By: Ella Hugo; David A. Savage; Friedrich Schneider; Benno Torgler
    Abstract: The ambiguous phenomenon of corruption has long b een the cause of great theoretical debate in economics. By using Structural Equation Modelling, with the two types of corruption as a latent variable, this paper employs causal and indicative variables specific to the Latin American region to test for rent seeking and systemic corruption in th e period between 1980-2018. The findings provide evidence for two types of corruption, one generated by greed, and the other a solution to market failures. Such results support the view that corruption encompasses a complex set of social behaviours.
    Keywords: Rent Seeking Corruption; Systemic Corruption; Shadow Economy; Latin America
    JEL: D73 K42 O17
    Date: 2021–07
  5. By: Epaulard Anne,; Zapha Chloé.
    Abstract: A European directive requires Member States to give firms access to preventive restructuring procedures. This paper assesses the interest of a procedure distinct from that for insolvent firms. It is based on the French experience, where a preventive procedure has coexisted with the more common restructuring procedure since 2006. The spatial and temporal heterogeneity of the Commercial Courts' decisions allows the identification of the causal impact of the conversion from the preventive procedure to the common one on the firm's survival chances. Using an (almost) exhaustive sample of preventive bankruptcy fillings over 2010-2016, we show that conversion reduces the probability of firm survival by 50 p.p., which corresponds to indirect bankruptcy costs of around 20% of the firm assets. Our interpretation is that the low restructuring rate under the common bankruptcy procedure may alarm some of the firm's stakeholders, especially its customers. This in turn aggravates the firm's difficulties and reduces its chances of restructuring under the common procedure. We provide some empirical evidence to support this interpretation. A distinct preventive procedure helps prevent this spiral.
    Keywords: Corporate Bankruptcy; Costs of Bankruptcy; Law and Economics; Preventive Restructuring.
    JEL: G33 K22
    Date: 2021
  6. By: Patrick M. Kline; Evan K. Rose; Christopher R. Walters
    Abstract: We study the results of a massive nationwide correspondence experiment sending more than 83,000 fictitious applications with randomized characteristics to geographically dispersed jobs posted by 108 of the largest U.S. employers. Distinctively Black names reduce the probability of employer contact by 2.1 percentage points relative to distinctively white names. The magnitude of this racial gap in contact rates differs substantially across firms, exhibiting a between-company standard deviation of 1.9 percentage points. Despite an insignificant average gap in contact rates between male and female applicants, we find a between-company standard deviation in gender contact gaps of 2.7 percentage points, revealing that some firms favor male applicants while others favor women. Company-specific racial contact gaps are temporally and spatially persistent, and negatively correlated with firm profitability, federal contractor status, and a measure of recruiting centralization. Discrimination exhibits little geographical dispersion, but two digit industry explains roughly half of the cross-firm variation in both racial and gender contact gaps. Contact gaps are highly concentrated in particular companies, with firms in the top quintile of racial discrimination responsible for nearly half of lost contacts to Black applicants in the experiment. Controlling false discovery rates to the 5% level, 23 individual companies are found to discriminate against Black applicants. Our findings establish that systemic illegal discrimination is concentrated among a select set of large employers, many of which can be identified with high confidence using large scale inference methods.
    JEL: C11 C9 C93 J7 J71 J78 K31 K42
    Date: 2021–07
  7. By: Luisa Brunori (CHJ - Centre d'histoire judiciaire - UMR 8025 - Université de Lille - CNRS - Centre National de la Recherche Scientifique, Université de Lille)
    Abstract: The "Suma de tratos y contratos" (1569-1571) by Tomás de Mercado is the first legal treatise on trade that explicitly takes into account the specificities of Spanish trade with the Indias. Tomás de Mercado was faced with very profound changes in trade: long distances, large convoy sizes, the need for large amounts of funding, high risk, variations in prices and the value of money... From a theological-legal point of view, these upheavals posed new and complex questions. Mercado, advisor to the merchants of Seville and an excellent knowledge of New Spain, analyses the sudden transformation of economic and juridical practice with finesse and realism. The 'Suma' is thus an extraordinary real-time testimony to the profound transformations taking place in 16th century commerce. Moreover, faced with fundamental questions of moral order and juridical legitimacy, Mercado proposes legal solutions of high equilibrium in which theological imperatives are masterfully reconciled with the needs of transatlantic commercial practice.
    Keywords: Legal history,Business history,Early modern History,Law and Economics,Late scholasticism,Commercial law
    Date: 2021–06
  8. By: Olivier Guillot; Antoine Parent
    Abstract: This paper explores the issue of the executions of French soldiers during the WW1 in a quantitative perspective. The database of French Ministry of Defense “Shot in the First World War†is exploited here for the first time to provide a complete description of the statistical portrait of the soldiers who were sentenced to death by a council of war or summarily executed. This database provides individual characteristics (skills, occupations), military variables (corps, rank) to which we have added contextual variables related to living conditions, weather conditions, illiteracy rates, dummies for regional language, county’s level of alcohol consumption, county’s voters abstention rate. Specifically, we investigate whether the variations in the number of executions over time were related to the intensity of engagements or to pacifist motives or other political considerations, as suggested in the literature. Two main findings emerge from our research: conversely to conventional wisdom, the soldiers executed in 1917, the year of the mutinies, did not differ from the rest of the sample. If statistical differences exist between years, the difference refers to 1914, not 1917. Our analysis leads to nuance the pacifist explanation. We give evidence that the conditions of survival on the front and the intensity of fights were the two main drivers of executions.
    Keywords: World War I, Defense economics, Conflict, Military history
    JEL: N44 K14 K42 D74
    Date: 2021–08
  9. By: Stjepan Srhoj; Dejan Kovač; Jacob N. Shapiro; Randall Filer
    Abstract: Bankruptcy restructuring procedures are used in most legal systems to decide the fate of businesses facing financial hardship. We study how bargaining failures in such procedures impact the economic performance of participating firms in the context of Croatia, which introduced a “pre-bankruptcy settlement” (PBS) process in the wake of the Great Recession of 2007 - 2009. Local institutions left over from the communist era provide annual financial statements for both sides of more than 180,000 debtor-creditor pairs, enabling us to address selection into failed negotiations by matching a rich set of creditor and debtor characteristics. Failures to settle at the PBS stage due to idiosyncratic bargaining problems, which effectively delays entry into the standard bankruptcy procedure, leads to a lower rate of survival among debtors as well as re-duced employment, revenue, and profits. We also track how bargaining failures diffuse through the network of creditors, finding a significant negative effect on small creditors, but not others. Our results highlight the impact of delay and the importance of structuring bankruptcy procedures to rapidly resolve uncertainty about firms’ future prospects.
    Keywords: bankruptcy, insolvency, liquidation, restructuring
    JEL: G33 G34 D02 L38 P37
    Date: 2021
  10. By: Azacis, Helmuts (Cardiff Business School); Vida, Peter (Corvinus Institute for Advanced Studies, Corvinus University of Budapest)
    Abstract: A competition authority has an objective, which specifies what output profile firms need to produce as a function of production costs. These costs change over time and are only known by the firms. The objective is implementable if in equilibrium, the firms cannot collude on their reports to the competition authority. Assuming that the firms can only report prices and quantities, we characterize what objectives are one-shot and repeatedly implementable. We use this characterization to identify conditions when the competitive output is implementable. We extend the analysis to the cases when a buyer also knows the private information of firms and when the firms can supply hard evidence about their costs.
    Keywords: Collusion, Antitrust, (Repeated) Implementation, Monotonicity, Price-Quantity Mechanism, Hard Evidenc
    JEL: C72 C73 D71 D82 L41
    Date: 2021–08

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