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on Law and Economics |
| By: | Massimo Motta |
| Abstract: | Antitrust agencies all over the world have been investigating large digital platforms for practices which may constitute an abuse of dominance. Here I discuss practices (including ‘selfpreferencing’ and denial or degradation of interoperability) which can be interpreted as foreclosure in vertically-related or complementary markets. I discuss in particular a few high-profile cases involving Amazon, Apple, Facebook and Google. I focus on possible theories of harm for such cases and show that both original simple models and well-established economic theories (adapted or interpreted) provide a rationale for anti-competitive foreclosure. |
| Keywords: | self-preferencing, abuse of dominance, monopolization, exclusionary practices, digital platforms, two-sided markets, vertical foreclosure |
| JEL: | D40 K21 L10 L40 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1374&r=law |
| By: | Rachel Nesbit |
| Abstract: | Mental health disorders are particularly prevalent among those in the criminal justice system. Using North Carolina court cases from 1994 to 2009, I evaluate whether mental health treatment as a term of probation decreases the likelihood that offenders return to the criminal justice system in the future. Among offenders sentenced to probation, I compare those who were required to seek mental health treatment to those who were not, using random variation in judge assignment. I find that being assigned to seek mental health treatment decreases the likelihood of three-year recidivism by 5.6 percentage points, or 17 percent. Treatment is most effective in reducing future violent and property crimes, and the effect increases over time since conviction. A simple cost benefit analysis suggests that the treatment-induced decrease in future crime would be more than sufficient to offset the costs of providing treatment. |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2212.06736&r=law |
| By: | Chen, Daniel L.; Ash, Elliott; Naidu, Suresh |
| Abstract: | This paper provides a quantitative analysis of the eects of the early law and economics movement on the U.S. judiciary. Using the universe of published opinions in U.S. Circuit Courts and 1 million District Court criminal sentencing decisions linked to judge identity, we estimate the eect of attendance in the con- troversial Manne economics training program, an intensive course attended by almost half of federal judges between 1976 and 1999. After attending economics training, participating judges use more economics language, render more conser- vative verdicts in economics cases, rule against regulatory/taxation agencies more often, and impose longer criminal sentences. These results are robust to adjusting for a wide variety of covariates that predict the timing of attendance. Non-Manne judges randomly exposed to Manne peers on previous cases increase their use of economics language in subsequent opinions, suggesting economics ideas diused throughout the judiciary. |
| JEL: | D7 K0 Z1 |
| Date: | 2022–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:127594&r=law |
| By: | Ash, Elliott; Asher, Sam; Bhowmick, Aditi; Bhupatiraju, Sandeep; Chen, Daniel L.; Devi, Tatanya; Goessmann, Christoph; Novosad, Paul; Siddiqi, Bilal |
| Abstract: | We study judicial in-group bias in Indian criminal courts, collecting data on over 80 million legal case records from 2010–2018. We exploit quasi-random as- signment of judges and changes in judge cohorts to examine whether defendant outcomes are affected by being assigned to a judge with a similar religious or gender identity. We estimate tight zero effects of in-group bias. The upper end of our 95% confidence interval rejects effect sizes that are one-fifth of those in most of the prior literature. |
| JEL: | J15 J16 K4 O12 |
| Date: | 2022–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:127633&r=law |
| By: | Chen, Daniel L.; Yeh, Susan |
| Abstract: | Does obscenity law corrode moral values and does it matter? Using random judge assignment and all U.S. obscenity precedents since 1958, we present four main results. Progressive laws liberalized sexual attitudes and behaviors, reduced child abuse, but increased asymptomatic STDs. We document that newspapers reported on obscenity cases. We then assign data entry workers to transcribe randomly allocated newsreports and find that exposure to progressive law shifts attitudes. Second-order norm shifts are consistent with a model where laws sanctioning activity increase its perceived prevalence, and laws shape values when sanctioned activities are prevalent. Deterrence does not solely mediate law’s impacts. |
| Keywords: | Law and norms; expressive law; cultural change |
| JEL: | J12 Z1 N32 |
| Date: | 2022–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:127636&r=law |
| By: | Langenbucher, Katja |
| Abstract: | Search costs for lenders when evaluating potential borrowers are driven by the quality of the underwriting model and by access to data. Both have undergone radical change over the last years, due to the advent of big data and machine learning. For some, this holds the promise of inclusion and better access to finance. Invisible prime applicants perform better under AI than under traditional metrics. Broader data and more refined models help to detect them without triggering prohibitive costs. However, not all applicants profit to the same extent. Historic training data shape algorithms, biases distort results, and data as well as model quality are not always assured. Against this background, an intense debate over algorithmic discrimination has developed. This paper takes a first step towards developing principles of fair lending in the age of AI. It submits that there are fundamental difficulties in fitting algorithmic discrimination into the traditional regime of antidiscrimination laws. Received doctrine with its focus on causation is in many cases ill-equipped to deal with algorithmic decision-making under both, disparate treatment, and disparate impact doctrine.0F 1 The paper concludes with a suggestion to reorient the discussion and with the attempt to outline contours of fair lending law in the age of AI. |
| Keywords: | credit scoring methodology,AI enabled credit scoring,AI borrower classification,responsible lending,credit scoring regulation,financial privacy,statistical discrimination |
| JEL: | C18 C32 K12 K23 K33 K40 J14 O31 O33 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:369&r=law |
| By: | Chemin, Matthieu; Chen, Daniel L.; Di Maro, Vincenzo; Kimalu, Paul; Mokaya, Momanyi; Ramos-Maqueda, Manuel |
| Abstract: | Can data science be used to improve the functioning of courts, and unlock the positive effects of institutions on economic development? In a nationwide randomized experiment in Kenya, we use algorithms to identify the greatest sources of court delay for each court and recommend actions. We randomly assign courts to receive no information, information, or an information and accountability intervention. Information and accountability reduces case duration by 22%. We find an effect on contracting behaviour, with more written labor contracts being signed by firms, and an effect on wage, since jobs with written labor contracts pay more. These results demonstrate a causal relationship between judicial institutions and development outcomes. |
| Date: | 2022–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:127593&r=law |
| By: | Marina Calanca (Ministero della Giustizia); Luigi Cipollini (Ministero della Giustizia); Silvia Giacomelli (Bank of Italy); Giuliana Palumbo (Ministero della Giustizia); Giacomo Rodano (Bank of Italy) |
| Abstract: | The paper describes how the real estate foreclosure process worked in the period 2014-21. It analyses the effects of the main regulatory changes adopted in recent years to improve their management (Decree Law 83/2015, Decree Law 59/2016, and the 2017 guidelines issued by the High Council of the Judiciary). The paper documents that: i) the number of pending procedures decreased by 39 per cent, due to the combined effect of a reduction in the number of foreclosures initiated and an increase in the number of procedures terminated; ii) the regulatory changes fostered a significant reduction in the time necessary to settle the phases in which it is currently possible to make quantitative assessments (the median duration of the pre-sale and sale phases were shortened by almost 25 per cent and 50 per cent respectively).The improvements appear to be permanent: after lengthening during the most acute phase of the COVID-19-induced health crisis, the duration of all the phases has returned to pre-pandemic levels. |
| Keywords: | foreclosures, civil justice reform, non-performing loans |
| JEL: | G21 K10 K40 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_742_22&r=law |
| By: | Pierre Cahuc (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics, CEPR - Center for Economic Policy Research - CEPR); Stéphane Carcillo (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics); Bérangère Patault (UvA - University of Amsterdam [Amsterdam]); Flavien Moreau (IMF - "Research Department International Monetary Fund (IMF)" - International Monetary Fund (IMF)) |
| Abstract: | Does judge subjectivity in labor courts influence firm performance? We study the economic consequences of judge decisions by collecting information on Appeal court rulings, combined with administrative firm-level records covering the whole universe of French firms. The quasi-random assignment of judges to cases reveals that judge bias, defined as judge-specific differences on granting compensation for wrongful dismissal, has statistically significant effects on the survival and employment of small firms, especially among very small and low-performing ones. When compensation for wrongful dismissal is instrumented by judge bias, an increase in compensation of 1 percent of the payroll reduces employment growth by 5 percentage points after 3 years for those firms. |
| Keywords: | Dismissal compensation, Judge bias, Firm survival, Employment |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03881619&r=law |
| By: | Emeric Henry (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR); Marco Loseto (University of Chicago); Marco Ottaviani (Bocconi University [Milan, Italy], BIDSA - Bocconi Institute for Data Science and Analytics - Bocconi University [Milan, Italy], CEPR - Center for Economic Policy Research - CEPR, IGIER) |
| Abstract: | We analyze the optimal mix of ex ante experimentation and ex post learning for the dynamic adoption of activities with uncertain payoffs in a two-phase model of information diffusion. In a first preintroduction phase, costly experimentation is undertaken to decide whether to adopt an activity or abandon experimentation. In a second stage following adoption, learning can continue possibly at a different pace while the activity remains in place; the withdrawal option is exercised following the accumulation of sufficiently bad news. We compare from a law and economics perspective the performance of three regulatory frameworks commonly adopted to govern private experimentation and adoption incentives: liability, withdrawal, and authorization regulation. Liability should be preempted to avoid chilling of activities that generate large positive externalities consistent with the preemption doctrine. Liability should be used to discourage excessive experimentation for activities that generate small positive externalities. Authorization regulation should be lenient whenever it is used consistent with the organization of regulation in a number of areas, ranging from product safety to antitrust. |
| Keywords: | Authorization regulation,Liability,Withdrawal,Experimentation,Preemption doctrine |
| Date: | 2022–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03874153&r=law |
| By: | Shroff, Ravi; Vamvourellis, Konstantinos |
| Abstract: | Field studies in many domains have found evidence of decision fatigue, a phenomenon describing how decision quality can be impaired by the act of making previous decisions. Debate remains, however, over posited psychological mechanisms underlying decision fatigue, and the size of effects in high-stakes settings. We examine an extensive set of pretrial arraignments in a large, urban court system to investigate how judicial release and bail decisions are influenced by the time an arraignment oc-curs. We find that release rates decline modestly in the hours before lunch and before dinner, and these declines persist after statistically adjusting for an extensive set of ob-served covariates. However, we find no evidence that arraignment time affects pretrial release rates in the remainder of each decision-making session. Moreover, we find that release rates remain unchanged after a meal break even though judges have the opportunity to replenish their mental and physical resources by resting and eating. In a complementary analysis, we find that the rate at which judges concur with prosecutorial bail requests does not appear to be influenced by either arraignment time or a meal break. Taken together, our results imply that to the extent that decision fatigue plays a role in pretrial release judgments, effects are small and inconsistent with previous explanations implicating psychological depletion processes. |
| Keywords: | decision fatigue; judicial decision making; mental depletion; pretrial detention |
| JEL: | C1 |
| Date: | 2022–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:117579&r=law |
| By: | Feir, Donn. L. (University of Victoria); Jones, Maggie E. C. (University of Victoria); Scoones, David (University of Victoria) |
| Abstract: | Recent changes in Canadian legislation have enabled First Nations to adopt property taxation and other forms of taxation on reserves, thereby allowing them to directly finance their local governments through local tax revenues. In this paper, we compile data on the passage of First Nations tax laws over a thirty year period from a centralized national database on First Nations by-laws, the First Nations Gazette. We combine these data with additional sources to analyze the factors that are associated with First Nations exercising their taxation authority. We find evidence of geographic policy diffusion consistent with First Nations learning from their neighbours and direct evidence that formal educational and institutional resources are important correlates of tax law adoption. Understanding this process informs the broader literature on the evolution of taxation structures and local political incentives, and may contain important lessons for Indigenous tax jurisdiction in other contexts. It is also a critical first step towards assessing the long-term consequences of First Nations' new fiscal powers. |
| Keywords: | state evolution, First Nations, Indigenous, taxation, property, public finance |
| JEL: | H11 H12 H71 P48 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15820&r=law |
| By: | POSADA SANCHEZ Monica (European Commission - JRC); POGORZELSKA Katarzyna (European Commission - JRC) |
| Abstract: | Application Programming Interfaces (APIs) have an enabling role in establishing digital ecosystems and coordinating digital interactions. A robust and performing technical infrastructure is essential but insufficient to ensure a sustainable thriving of digital environments. Both technical and legal stability are necessary to cherish for the mutual benefit of service providers, their users and society at large. This stability is crucial to ensure the robustness and competitiveness of digital value chains and the thriving of the European digital ecosystem. Against this backdrop, this report explores crucial organisational and legal aspects of managing and coordinating digital interactions through APIs. Specifically, the analysis describes API-related legal obligations and applicable law. The study also analyses the current practices of coordination and negotiation with their digital counterparts in eight different organisations. Finally, the work analyses the clauses and conditions encoded in 4K API's Term of Services documents (ToS) to evaluate if current ToS drafting practices foster or hinder the thriving of fair digital environments. This work aims to clarify relevant aspects (e.g., API actors' roles and functions, API-related rights and obligations) that should be considered when designing rights and responsibilities flows within digital chains and the ecosystem at large |
| Keywords: | Digital transformation, digital coordination, digital transition, digital governance, digital transition, API |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc129940&r=law |
| By: | Keefer, Philip; Roseth, Benjamin |
| Abstract: | Do targeted transparency interventions reduce corrupt behavior when corrupt actors are few and politically influential; their behavior imposes small costs on numerous individuals; and corrupt behavior is difficult to observe? Results from a study of informal audits and text messages to parents, meant to curb corruption in the School Meals Program of Colombia, suggests that they can. Theory is pessimistic that transparency interventions can change the behavior of actors who exert significant influence over supervisory authorities. Moreover, inherent methodological obstacles impede the identification of treatment effects. Results substantiate the presence of these obstacles, especially considerable spillovers from treated to control groups. Despite spillovers, we find that parental and operator behavior are significantly different between treatment and control groups. Additional evidence explains why operator behavior changed: out of concern that systematic evidence of corrupt behavior would trigger enforcement actions by high-level enforcement agencies outside of the political jurisdictions where they are most influential. |
| Keywords: | corruption;audits;contracting out |
| JEL: | D73 H40 H42 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:11331&r=law |
| By: | Luigi Zingales |
| Abstract: | Digital markets are global in nature and prone to "tipping". The combination of these two factors makes the distortions of the inevitable monopolies in these markets very large, but it also undermines any effort at dealing with these distortions at a national level. I argue that the problem can only be solved by structural interventions that restore conditions for competition. Yet, no national regulator will have the ability to do so. Regulation can only arise in an international context. Paradoxically, the increasing international tension can create political opportunities for such international regulation. |
| Keywords: | Big tech, regulation, market power |
| JEL: | L5 L86 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1063&r=law |
| By: | Alicia von Schenk; Victor Klockmann; Jean-Fran\c{c}ois Bonnefon; Iyad Rahwan; Nils K\"obis |
| Abstract: | People are not very good at detecting lies, which may explain why they refrain from accusing others of lying, given the social costs attached to false accusations - both for the accuser and the accused. Here we consider how this social balance might be disrupted by the availability of lie-detection algorithms powered by Artificial Intelligence. Will people elect to use lie detection algorithms that perform better than humans, and if so, will they show less restraint in their accusations? We built a machine learning classifier whose accuracy (67\%) was significantly better than human accuracy (50\%) in a lie-detection task and conducted an incentivized lie-detection experiment in which we measured participants' propensity to use the algorithm, as well as the impact of that use on accusation rates. We find that the few people (33\%) who elect to use the algorithm drastically increase their accusation rates (from 25\% in the baseline condition up to 86% when the algorithm flags a statement as a lie). They make more false accusations (18pp increase), but at the same time, the probability of a lie remaining undetected is much lower in this group (36pp decrease). We consider individual motivations for using lie detection algorithms and the social implications of these algorithms. |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2212.04277&r=law |
| By: | Eduardo Perez-Richet (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR); Vasiliki Skreta (University of Texas at Austin [Austin], UCL - University College of London [London], CEPR - Center for Economic Policy Research - CEPR) |
| Abstract: | We study the optimal design of tests with manipulable inputs. Tests take a unidimensional state of the world as input and output, an informative signal to guide a receiver's approve or reject decision. The receiver wishes to only approve states that comply with her baseline standard. An agent with a preference for approval can covertly falsify the state of the world at a cost. We characterize receiver‐optimal tests and show they rely on productive falsification by compliant states. They work by setting a more stringent operational standard, and granting noncompliant states a positive approval probability to deter them from falsifying to the standard. We also study how falsification‐detection technologies improve optimal tests. They allow the designer to build an implicit cost of falsification into the test, in the form of signal devaluations. Exploiting this channel requires enriching the signal space. |
| Keywords: | Information Design,Falsification,Tests,Manipulation,Cheating,Persuasion |
| Date: | 2022–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03873972&r=law |
| By: | Papiya Ghosh (Indian Institute of Foreign Trade, New Delhi, India); Rajendra P. Kunda (Jawaharlal Nehru University, New Delhi, India) |
| Abstract: | This paper is a contribution to the literature on efficient assignment of liabilities for accidental losses arising out of two party interactions involving negative externalities.The objective is to examine the requirements that eciency imposes on rules for the assignment of liabilities for such losses. We study efficiency proper ties of a very general class o frules which (i) decompose the loss into two components (speciied loss and excess loss); (ii)assigns the entire excess loss to the injurer if she is negligent and to the victim otherwise; and assign fixed proportions (not necessarily adding upto 1) of the specified loss to the two parties with the possibility of eventually resulting in an assignment of liabilities which can in principle be decoupled. In contrast to existing results we demonstrate that assignment of the specified loss is also important efficiency and complete decoupling is not inconsistent with efficiency. |
| Keywords: | LiabilityRule, negligence, decompositionofloss, decoupledliability, eciency. |
| JEL: | K13 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ift:wpaper:2157&r=law |
| By: | Alviarez, Vanessa; Head, Keith; Mayer, Thierry |
| Abstract: | We assess the consequences for consumers in 76 countries of multinational acquisitions in beer and spirits. Outcomes depend on how changes in ownership affect markups versus efficiency. We find that owner fixed effects contribute very little to the performance of brands. On average, foreign ownership tends to raise costs and lower appeal. Using the estimated model, we simulate the consequences of counter-factual national merger regulation. The US beer price index would have been 4-7% higher without divestitures. Up to 30% savings could have been obtained in Latin America by emulating the pro-competition policies of the US and EU. |
| Keywords: | Multinationals;Oligopoly;Markups;Concentration;Firm effects;Brands;Frictions;Mergers and acquisitions;Competition policy |
| JEL: | F23 F12 F61 L13 K21 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:11329&r=law |
| By: | Piero Mazzarisi; Adele Ravagnani; Paola Deriu; Fabrizio Lillo; Francesca Medda; Antonio Russo |
| Abstract: | Identifying market abuse activity from data on investors' trading activity is very challenging both for the data volume and for the low signal to noise ratio. Here we propose two complementary unsupervised machine learning methods to support market surveillance aimed at identifying potential insider trading activities. The first one uses clustering to identify, in the vicinity of a price sensitive event such as a takeover bid, discontinuities in the trading activity of an investor with respect to his/her own past trading history and on the present trading activity of his/her peers. The second unsupervised approach aims at identifying (small) groups of investors that act coherently around price sensitive events, pointing to potential insider rings, i.e. a group of synchronised traders displaying strong directional trading in rewarding position in a period before the price sensitive event. As a case study, we apply our methods to investor resolved data of Italian stocks around takeover bids. |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2212.05912&r=law |