Recent berkeley_law_econ items

Exclusion as a Core Competition Problem

Wed, 29 Feb 2012 00:00:00 +0000

Exclusion as a Core Competition Problem

An Economics Theory of Information Escrows

Thu, 26 Jan 2012 00:00:00 +0000

An Economics Theory of Information Escrows

The Effect of Police on Crime: New Evidence from U.S. Cities, 1960-2008

Fri, 28 Oct 2011 00:00:00 +0000

The Effect of Police on Crime: New Evidence from U.S. Cities, 1960-2008

Patent-Infringement Injunctions' Scope

Sun, 16 Oct 2011 00:00:00 +0000

This article addresses a largely neglected issue: the scope of injunctions against patent infringement. First, the article uses an economic model for infringer incentives to show how concerns of injunction scope are substantially analogous to much more widely examined concerns of patent scope. Second, the article discusses existing U.S. law on patent-infringement injunctions and develops a taxonomy of injunction types. The article then reports results from a systematic study of patent-infringement injunctions issued by U.S. district courts in 2010. Startlingly, nearly 60% of 143 identified orders include “obey the law” language that apparently violates the United States’ Federal Rules of Civil Procedure, at least as those rules have been understood by the U.S. Court of Appeals for the Federal Circuit. The subset of actively opposed injunctions exhibits such error at a lower but still substantial rate of about 47%. On the other hand, only three of 25 injunctions directed to...

Law and Economics in the Israeli Legal System: Why Learned Hand Never Made It to Jerusalem

Thu, 8 Sep 2011 00:00:00 +0000

Law and Economics in the Israeli Legal System: Why Learned Hand Never Made It to Jerusalem

The Price of Private Enforcement Under the False Claims Act

Wed, 7 Sep 2011 00:00:00 +0000

The Price of Private Enforcement Under the False Claims Act

Regulation, Unemployment, and Cost-Benefit Analysis

Mon, 1 Aug 2011 00:00:00 +0000

Regulation, Unemployment, and Cost-Benefit Analysis

Ideas and Innovations: Which should be subsidized?

Thu, 14 Jul 2011 00:00:00 +0000

Ideas and Innovations: Which should be subsidized?

Rethinking America’s Illegal Drug Policy

Thu, 14 Jul 2011 00:00:00 +0000

This paper provides a critical review of the empirical and theoretical literatures on illegal drug policy, including cross-country comparisons, in order to evaluate three drug policy regimes: criminalization, legalization and “depenalization.” Drawing on the experiences of various states, as well as countries such as Portugal and the Netherlands, the paper attempts to identify cost-minimizing policies for marijuana and cocaine by assessing the differing ways in which the various drug regimes would likely change the magnitude and composition of the social costs of each drug. The paper updates and evaluates Jeffrey Miron’s 1999 national time series analysis of drug prohibition spending and the homicide rate, which underscores the lack of a solid empirical base for assessing the theoretically anticipated crime drop that would come from drug legalization. Nonetheless, the authors conclude that given the number of arrests for marijuana possession, and the costs of incarceration...

The Economics of Horizontal Government Cooperation

Mon, 11 Apr 2011 00:00:00 +0000

The Economics of Horizontal Government Cooperation

Spatial Competition, Network Externalities, and Market Structure: An Application to Commercial Banking.

Thu, 31 Mar 2011 00:00:00 +0000

Spatial Competition, Network Externalities, and Market Structure: An Application to Commercial Banking.

Law as a Byproduct: Theories of Private Law Production

Mon, 28 Mar 2011 00:00:00 +0000

Law as a Byproduct: Theories of Private Law Production

The Philosophy of Law and Economics

Wed, 19 Jan 2011 00:00:00 +0000

The Philosophy of Law and Economics

Class Discussion: Liability for Incompensable Harms. Presenter: Cooter / David DePianto

Fri, 14 Jan 2011 00:00:00 +0000

Class Discussion: Liability for Incompensable Harms. Presenter: Cooter / David DePianto

Building Criminal Capital vs Specific Deterrence: The Effect of Incarceration Length on Recidivism

Fri, 10 Dec 2010 00:00:00 +0000

Building Criminal Capital vs Specific Deterrence: The Effect of Incarceration Length on Recidivism

Selective Disclosure of Public Information: Who Needs to Know?

Wed, 8 Dec 2010 00:00:00 +0000

Selective Disclosure of Public Information: Who Needs to Know?

Insiders and Outsiders: Does Forbidding Sexual Harassment Exacerbate Gender Inequality?

Wed, 8 Dec 2010 00:00:00 +0000

Insiders and Outsiders: Does Forbidding Sexual Harassment Exacerbate Gender Inequality?

Willingness to Pay, Death, Wealth and Damages

Mon, 6 Dec 2010 00:00:00 +0000

Willingness to Pay, Death, Wealth and Damages

Testing for Racial Discrimination in Bail Setting Using Nonparametric Estimation of a Parametric Model

Fri, 3 Dec 2010 00:00:00 +0000

Testing for Racial Discrimination in Bail Setting Using Nonparametric Estimation of a Parametric Model

Maturing into Normal Science: Empirical Legal Studies' Effect on Law & Economics

Wed, 24 Nov 2010 00:00:00 +0000

Maturing into Normal Science: Empirical Legal Studies' Effect on Law & Economics

Reconsidering Racial Bias in Motor Vehicle Searches: Theory and Evidence

Mon, 22 Nov 2010 00:00:00 +0000

Reconsidering Racial Bias in Motor Vehicle Searches: Theory and Evidence

Deliberation versus Bargaining on the U.S. Court of Appeal: Evidence from Sexual Harassment Law

Mon, 15 Nov 2010 00:00:00 +0000

This paper investigates indirect influences of gender diversification on the U.S. Court of Appeals, focusing upon whether and how women influence policy through pathways other than their individual votes. We analyze workplace sexual harassment cases spanning 1977 to 2006. Building upon recent work showing that women influence the votes of male colleagues when serving with them on three-judge panels, we probe the mechanism driving this pattern, and we find that deliberative processes rather than bargaining dynamics explain gender panel effects. We also find that the extent of doctrine which women have participated in crafting is positively associated with subsequent decisions for the plaintiff, and that the proportion of women on the full circuit, which exercises a monitoring role over individual panels, is associated with panel decisions for the plaintiff. We thus add to work showing that the influence of women on the U.S. Court of Appeals extends well beyond their individual...

Where Do Firms Issue Debt? An Empirical Analysis of Issuer Location and Regulatory Competition in Europe

Wed, 1 Sep 2010 00:00:00 +0000

In this article, we study the choice of issuer location and regulatory competition in the European corporate debt market. We find that, in absolute terms, Germany has by far the highest outflow of debt issues, while the Netherlands, the UK, Luxembourg and Ireland see the most inflows (in that order). We use a panel gravity model to investigate country specific factors attracting foreign subsidiaries as issuer. The data clearly support the prediction that the locational choice is positively influenced by a low withholding tax rate. There is also some evidence that corporate tax rates play a role. We do not find support for creditor protection rules in bankruptcy as a driver of cross-border debt securities issues. Hence, countries who wish to attract issuers are well-advised to reduce their withholding tax rates – creditor rights seem not to matter.

Inducing Corporate Compliance: A Law and Economics Analysis of Corporate Liability Regimes

Mon, 30 Aug 2010 00:00:00 +0000

Inducing Corporate Compliance: A Law and Economics Analysis of Corporate Liability Regimes

Deal Or No Deal? Licensing Negotiations By Standard Development Organizations

Thu, 5 Aug 2010 00:00:00 +0000

Deal Or No Deal? Licensing Negotiations By Standard Development Organizations

Adversarial versus Inquisitorial Testimony

Tue, 3 Aug 2010 00:00:00 +0000

Adversarial versus Inquisitorial Testimony

Insolvency and Biased Standards - The Case for Proportional Liability

Tue, 3 Aug 2010 00:00:00 +0000

We analyze liability rules in a setting where injurers are potentially insolvent and where negligence standards may deviate from the socially optimal level. We show that proportional liability, which sets the measure of damages equal to the harm multiplied by the probability that it was caused by an injurer’s negligence, is preferable to other existing negligence-based rules. Moreover, proportional liability outperforms strict liability if the standard of due care is not set too low. Our analysis also suggests that courts should rely on statistical evidence and bar individualized causal claims that link the harm suffered by a plaintiff to the actions of the defendant. Finally, we provide a result which might be useful to regulators when calculating minimum capital requirements or minimum mandatory insurance for different industries.

Two Kinds of Procedural and Substantive Unconscionability

Mon, 12 Apr 2010 00:00:00 +0000

Two Kinds of Procedural and Substantive Unconscionability

Reforming the Tax Preference for Health Insurance

Mon, 1 Mar 2010 00:00:00 +0000

Reforming the Tax Preference for Health Insurance

Inequality and Local Government: Evidence from U.S. Cities and School Districts, 1970-2000.

Wed, 10 Feb 2010 00:00:00 +0000

Inequality and Local Government: Evidence from U.S. Cities and School Districts, 1970-2000.

Law for a Flat World: Legal Infrastructure and the New Economy

Mon, 1 Feb 2010 00:00:00 +0000

In the last two decades, the economy has undergone fundamental transformation with the twin structural changes of a great increase in the size of global markets and the internet‐driven development of a platform for global exchange and work processes. These changes have transformed the economic demand for law: the demand for legal inputs that will support the creation of value in economic relationships. Not merely the quantity but the type of legal inputs required by the new economy is significantly different from those required by the old economy. The economic demand for law in the new economy requires support for the much higher rates at which economic relationships now cross both firm and jurisdictional boundaries, the more rapid depreciation of legal solutions, the increased differentiation of legal problems, the reduced tolerance for legal transaction costs created by high velocity and global competition, and a greater need for integration of business and legal expertise...

Predatory Pricing

Mon, 1 Feb 2010 00:00:00 +0000

Judge Breyer famously worried that aggressive prohibitions of predatory pricing throw away a bird in hand (low prices during the alleged predatory period) for a speculative bird in the bush (preventing higher prices thereafter). Here, I argue that there is no bird in hand because entry cannot be presumed. Moreover, it is plausibly commonplace that post‐entry low prices or the threat of low prices has anticompetitive results by reducing entry and keeping prices high pre‐entry and post‐predation. I analyze three potential standards for identifying predatory pricing. Two are traditional but have been tangled together and must be distinguished. First, a price‐cost test based on sacrifice theory requires that either price or cost be measured by what I describe as “inclusive” measures. A price‐cost test to prevent the exclusion of equally efficient competitors, by contrast, requires that price and cost be measured by more traditional “exclusive” measures. Finally, I describe...

The SEC's Proposed Proxy Access Rules: Politics, Economics, and the Law.

Mon, 14 Dec 2009 00:00:00 +0000

The SEC's Proposed Proxy Access Rules: Politics, Economics, and the Law.

The Devolution of the Legal Profession: A Demand Side Perspective

Mon, 14 Dec 2009 00:00:00 +0000

The Devolution of the Legal Profession: A Demand Side Perspective

Corporate Law Through an Antitrust Lens

Fri, 11 Dec 2009 00:00:00 +0000

Antitrust law provides a better framework than corporate law for analyzing issues at the boundary between firms and markets. Such issues arise when shareholders are also competitors. For example, antitrust analysis calls into question the practice of joint bargaining by shareholders targeted by tender offers. Other issues illuminated by antitrust analysis include stakeholder coalitions and state antitakeover statutes.

Police vs. Prisons

Fri, 11 Dec 2009 00:00:00 +0000

Police vs. Prisons

Estimating the Impact of the Death Penalty on Murder

Fri, 11 Dec 2009 00:00:00 +0000

Does the death penalty provide greater deterrence of murders beyond that afforded by a sentence of life imprisonment? This question has been actively debated for centuries, with those arguing that capital punishment is a more severe punishment that will provide greater deterrence opposed by those who argue that state-sanctioned executions provide an environment conducive to unsanctioned homicides. Alternatively, some have argued that the death penalty is not as dreadful to potential murderers as the thought of life imprisonment or that the death penalty is less cost-effective than its alternatives. In the past half-century, this debate has turned from social theorists to empiricists. Given the availability of relatively high-quality data on American murder rates, executions, criminal justice statistics, and other relevant control variables as well as the number of researchers conducting sophisticated econometric studies over the last thirty years, one would think that a...

Examiner Characteristics and the Patent Grant Rate

Tue, 8 Dec 2009 00:00:00 +0000

In this paper, we show that there are important differences across patent examiners at the U.S. Patent and Trademark Office (USPTO), and that these relate to the most important decision made by the USPTO: whether or not to grant a patent. We find that more experienced examiners, and those who systematically cite less prior art, are more likely to grant patent applications. These results are not encouraging as a matter of public policy. But they do point to human resource policies as potentially important levers in patent system reform. (JEL Keywords: O34 - Intellectual Property Rights; O38 - Government Policy)

Berkeley Endowed Lecture on Law and Economics: "Transitions into--and out of--Liberal Democracy"

Fri, 13 Nov 2009 00:00:00 +0000

A society can be expected to evolve into liberal democracy, including private property and the rule of law, only if producer groups can organize and exert enough influence to prevent government predation. But groups strong enough to resist government predation are likely to be strong enough to mobilize government for predation against others. The resultant rent-seeking society may hollow out liberal democracy to a barely recognizable shell.

Did a Switch in Time Save Nine?

Thu, 29 Oct 2009 00:00:00 +0000

Did a Switch in Time Save Nine?

The Effect of Abortion Liberalization on Sexual Behavior: International Evidence

Fri, 23 Oct 2009 00:00:00 +0000

Most industrialized countries have increased access to abortion over the past 30 years. Economic theory predicts that abortion laws affect sexual behavior since they change the marginal cost of having risky sex. We use gonorrhea incidence as a metric of risky sexual behavior. Using a panel of 41 North American, European and Central Asian countries over the period 1980-2000, we estimate the impact of abortion law reform on risky sex. Compared to the most restrictive legislation that permits abortion only to save the pregnant woman’s life or her physical health, more liberal abortion laws are associated with at least thirty additional gonorrhea cases per 100,000 individuals. The marginal effect of laws which make abortion available on request is larger than the effect of laws which allow abortion on socioeconomic and mental health grounds. Our results are robust against a set of alternative sample constructions and model specifications.

Tobacco Regulation through Litigation: The Master Settlement Agreement

Thu, 1 Oct 2009 00:00:00 +0000

The 1998 Master Settlement Agreement resolved the unprecedented litigation in which the states sought to recoup the cigarette-related Medicaid costs. The litigation was settled through a combination of negotiated regulatory requirements and financial payments of about $250 billion over 25 years. Settlement payments received by states are strongly related to smoking-related medical costs but are also related to political factors. The payments largely took the form of an excise tax equivalent, raising potential antitrust concerns. The regulatory restrictions imposed by the agreement also raised antitrust concerns. However, there has been no evident shift in industry concentration. The increase in advertising and marketing expenses has largely taken the form of price discounts. The settlement sidestepped the usual procedures pertaining to the imposition of taxes and the promulgation of new regulations.

Accidental Death and the Rule of Joint and Several Liability

Thu, 1 Oct 2009 00:00:00 +0000

Reforms to the Joint and Several Liability rule (JSL) are one of the most common tort reforms and have been implemented by most US states. JSL allows plaintiffs to claim full recovery from one of the defendants, even if that defendant is only partially responsible for the tort. We develop a theoretical model that shows that the efficiency of the JSL rule depends critically on both whether the care taken by potential tortfeasors is observed, and on how the actions of the potential tortfeasors interact to cause the harm. We then provide evidence that reforms of the JSL rule have been accompanied by reductions in the accidental death rate in the U. S. This result is consistent with the hypothesis that the reform of JSL causes potential tortfeasors to take more care.

The Uneasy Case for Product Liability (co-authored with Steven Shavell)

Wed, 30 Sep 2009 00:00:00 +0000

We explain in this Article that the benefits of product liability may well be outweighed by its costs in a wide range of circumstances. One benefit is that the threat of liability may induce firms to improve product safety. However, this benefit is limited: even in the absence of product liability, firms would often be motivated by market forces to enhance product safety because their sales are likely to fall if their products harm consumers; moreover, their products must frequently conform to safety regulations. Consequently, product liability might not be expected to exert a significant additional influence on product safety — and the available empirical evidence suggests that such liability does not in fact have a measurable effect on the frequency of product accidents. A second benefit of product liability is that it causes product prices to increase to reflect the riskiness of products and thereby may improve consumer purchase decisions. But this benefit also involves...

The Effect of Mergers on Consumer Prices: Evidence from Five Mergers on the Enforcement Margin

Wed, 30 Sep 2009 00:00:00 +0000

In this paper we propose a method to evaluate the effectiveness of U.S. horizontal merger policy and apply it to the study of five recently consummated consumer product mergers. We selected the mergers from those that, from the public record, seemed most likely to be problematic. Thus we estimate an upper bound on the likely price effect of completed mergers. Our study employs retail scanner data and uses familiar panel data program evaluation procedures to measure price changes. Our results indicate that four of the five mergers resulted in some increases in consumer prices, while the fifth merger had little effect.

Strategic Information Acquisition and Mixed Judicial Panels (co-authored with Matthew Spitzer of USC Law School)

Fri, 18 Sep 2009 00:00:00 +0000

In the last fifteen years, a number of empirical studies of multi-member judicial panels have documented a phenomenon popularly known as "panel effects." Two principal findings of this literature are: (1) the inclusion of even a single (non-pivotal) member from outside the dominant ideological on the panel can induce induces the panel to reverse "like minded" administrative agencies more frequently than would a panel dominated wholly by the majority ideology; and (2) when mixed panels do not reverse, they frequently issue unanimous decisions. These apparently moderating effects of mixed panel composition pose a challenge to conventional median voter theory. In the face of this challenge, many scholars have offered their own explanation for panel effects (including collegiality; deliberation, whistle-blowing, and others). In this paper, we propose a general model that (among other things) predicts panel effects as a byproduct of strategic information acquisition. The kernel...

Branching Restrictions, Financial Market Integration, and Firm Growth: Evidence from U.S. Banking Deregulation

Tue, 18 Aug 2009 00:00:00 +0000

Branching Restrictions, Financial Market Integration, and Firm Growth: Evidence from U.S. Banking Deregulation

Legal Fictions as Strategic Instruments

Fri, 14 Aug 2009 00:00:00 +0000

Legal Fictions were one of the most distinctive and reviled features of the common law. Until the mid-nineteenth century, nearly every civil case required the plaintiff to make a multitude of false allegations which judges would not allow the defendant to contest. Why did the common law resort to fictions so often? Prior scholarship attributes legal fictions to a "superstitious disrelish for change" (Maine) or to a deceitful attempt to steal legislative power (Bentham). This paper provides a new explanation. Legal fictions were developed strategically by litigants and judges in order to evade appellate review. Before 1800, judicial compensation came, in part, from fees paid by litigants. Because plaintiffs chose the forum, judges had an incentive to expand their jurisdictions and create new causes of action. Judicial innovations, however, could be thwarted by appellate review. Nevertheless, appellate review was ordinarily restricted to the official legal record, which...

Jurisdictional Competition and the Evolution of the Common Law.

Tue, 30 Jun 2009 00:00:00 +0000

Jurisdictional Competition and the Evolution of the Common Law.

Who Created the Financial Crisis and How Do We Prevent the Next One?

Mon, 20 Apr 2009 00:00:00 +0000

Who Created the Financial Crisis and How Do We Prevent the Next One?

Public Choice and Legal Interpretation

Mon, 20 Apr 2009 00:00:00 +0000

Public Choice and Legal Interpretation

Fraud-on-the-Market Actions Against Foreign Issuers

Fri, 17 Apr 2009 00:00:00 +0000

Fraud-on-the-Market Actions Against Foreign Issuers

Does Private Selection Improve the Accuracy of Arbitrators' Decisions?

Thu, 19 Mar 2009 00:00:00 +0000

Does Private Selection Improve the Accuracy of Arbitrators' Decisions?

The Structure of the Enterprise Law: Complementarities among Contracts, Markets, and Laws in the Incentive Bargain of the Firm

Mon, 9 Mar 2009 00:00:00 +0000

The Structure of the Enterprise Law: Complementarities among Contracts, Markets, and Laws in the Incentive Bargain of the Firm

Is Administrative Law Inevitable?

Mon, 2 Mar 2009 00:00:00 +0000

Is Administrative Law Inevitable?

Racial Disparities in the Allocation of Wiretap Applications across Federal Judges

Mon, 23 Feb 2009 00:00:00 +0000

Racial Disparities in the Allocation of Wiretap Applications across Federal Judges

Intertemporal Choice and Legal Constraints

Tue, 27 Jan 2009 00:00:00 +0000

Intertemporal Choice and Legal Constraints

The Principle of Unconscionability

Mon, 26 Jan 2009 00:00:00 +0000

The Principle of Unconscionability

Blind Consent? A Social Psychological Investigation of Non-Readership of Click-Through Agreements

Wed, 14 Jan 2009 00:00:00 +0000

Blind Consent? A Social Psychological Investigation of Non-Readership of Click-Through Agreements

Are Securities Class Actions “Supplemental” to SEC Enforcement? An Empirical Analysis

Fri, 19 Sep 2008 00:00:00 +0000

Are Securities Class Actions “Supplemental” to SEC Enforcement? An Empirical Analysis

Berkeley Endowed Lectures in Law and Economics: "Toward a Unified Theory of Torts"

Fri, 18 Apr 2008 00:00:00 +0000

For at least the last 50 years two ways of looking at tort law have struggled for dominance. One characterized by system-builders, as Izhak Englard so felicitously termed us; the other by those who have seen in tort law the highest manifestation of the common law tradition of responding to breaches in non-criminal, often non-contractual interpersonal relationships. In this paper, I would like to explore the relationship between these two approaches, which I will suggest, find their common law antecedents, where else but, in the forms of actions, from which so much of modern Anglo-American private law derives. I will suggest that both approaches have always been there and that they have affected and shaped each other over the centuries and continue to do so today.

Power over Prosecutors Corrupts Politicians: Cross Country Evidence Using a New Indicator

Thu, 17 Apr 2008 00:00:00 +0000

It is hypothesized that prosecution agencies that are dependent on the executive have less incentives to prosecute crimes committed by government members which, in turn, increases their incentives to commit such crimes. Here, this hypothesis is put to an empirical test focusing on a particular kind of crime, namely corruption. In order to test it, it was necessary to create an indicator measuring de jure as well as de facto independence of the prosecution agencies. The regressions show that de facto independence of prosecution agencies robustly reduces corruption of officials.

Optimal Standards of Negligence when One Party is Uninformed

Mon, 14 Apr 2008 00:00:00 +0000

How should a court set legal standards of negligence or performance when one party to a potential future tort or contract case will be uninformed about the standards set by the court? Since the court cannot affect the behavior of the uninformed party, it might set the standard for the informed party at that level which is optimal given the behavior that can be expected of the uninformed. Thus, if the court expects the uninformed to take more than optimal care, it might set a lower than first best standard for the informed party. However, there are circumstances in which the court should maintain the first best standard for the informed party, namely when the uninformed party understands the risk and realizes that the informed party has an incentive to take due care to avoid liability. The uninformed party will then expect to bear the loss himself and will take adequate precautions. Hence, in the oft-occurring situation where the informed party is the injurer and acts first,...

Market Damages and the Economic Waste Fallacy

Mon, 7 Apr 2008 00:00:00 +0000

Market damages – the difference between the market price for goods or services at the time of breach and the contract price – are the best default rule whenever parties trade in thick markets: they induce parties to trade if and only if trade is efficient, and they do not create ex ante inefficiencies. Courts commonly overlook these virtues, however, when promisors offer a set of services some of which are not separately priced. For example, a promisor may agree to pay royalties on a mining lease and later to restore the promisee’s property. In these cases, courts compare the cost to the promisor of providing the service that was not supplied to the increase in the market value of the promisee/buyer’s property had the promisor/seller performed. When the cost of completion is large relative to the “market delta”– the increase in market value – courts concerned to avoid “economic waste” limit the buyer to the market value increase. This concern is misguided. Since the buyer...

Political Accountability Under Alternative Institutional Regimes

Fri, 14 Mar 2008 00:00:00 +0000

This article contributes to the development of a positive theory of the interaction between institutional checks and balances and public accountability. In particular, the authors are interested in how various institutional separation-of-powers rules affect voter behavior, and in how these rational voter responses may affect our positive and normative assessment of different separation-of-powers regimes. The authors compare three stylized institutional arrangements: The first is a “Unilateral Authority”. The second regime is a “Mandatory Checks and Balances” regime. The third and final regime they consider is an “Opt-In Checks and Balances” system. These are obviously only three of a much larger number of possible institutional arrangements, but their simple structure is useful in generating comparative insights that might then be transposed to more complex and realistic institutional settings.

Superstar CEOs

Fri, 14 Mar 2008 00:00:00 +0000

We analyze the impact of winning high-profile tournaments on the subsequent behavior of the tournament winner in the context of chief executive officers of U.S. corporations. We find that the firms of CEOs who achieve ”superstar” status via prestigious nationwide awards from the business press subsequently underperform beyond mean reversion. The underperformance of the company stock holds both relative to the overall market and relative to a sample of ”hypothetical award winners” with matching firm and CEO characteristics. We also find underperformance in accounting returns. At the same time, award-winning CEOs extract significantly higher compensation following the award, both in absolute amounts and relative to other top executives in their firm. They also spend significantly more time and effort on public and private activities outside their company such as assuming board seats or writing books. Our results suggest that media-induced superstar culture leads to behavioral...

Coups, Corporations, and Classified Information

Mon, 3 Mar 2008 00:00:00 +0000

We estimate the impact of political coups and top-secret coup planning on asset prices. We use declassified CIA documents and daily stock price data to estimate the effect of private events on asset prices of partially nationalized US companies that stood to benefit from US backed coups. We find that stock markets react to actions classified as top-secret. Private events which raise the likelihood of a coup affect a continued rise in returns on affected assets. After incorporating the impact of private information events occurring before the coup, stock price reactions to coups are substantial.

Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity

Tue, 22 Jan 2008 00:00:00 +0000

Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity

Mass Torts and the Incentives for Suit, Settlement, and Trial

Fri, 18 Jan 2008 00:00:00 +0000

We explore how the incentives of a plaintiff and her attorney, when considering filing suit and bargaining over settlement, can differ between those suits associated with stand-alone torts cases and those suits involving mass torts. We contrast “individual-based liability determination” (IBLD), wherein a clear description of the mechanism by which a defendant’s actions translate into a plaintiff’s harm is available, with “population-based liability determination” (PBLD), wherein cases rely upon the prevalence of harms in the population to persuade a judge or jury to draw an inference of causation or fault. We show that PBLD creates a “rational optimism effect” on the plaintiff’s side that is inherent in many mass tort settings. For plaintiffs and their attorneys this effect creates incentives for higher settlement demands and results in greater interim joint payoffs and an increased propensity to file suit. Consequently, the defendant in a PBLD case faces an increased ex ante...

The Lifespan of Written Constitutions

Fri, 11 Jan 2008 00:00:00 +0000

Written constitutions, though designed to endure, are remarkably fragile, with a mean lifespan of only 17 years across all countries since 1789. This paper draws on the literature on endogenous constitutions to explore the determinants of constitutional durability among nation states. It first examines the relationship between constitutional change and regime change, analyzing the causes of constitutional demise. It then considers the role of state-level structural characteristics as well as features of constitutional design in allowing constitutions to withstand exogenous shocks. The findings suggest that certain features of constitutional design do make a difference, and can help constitutions endure: in particular, the inclusiveness of the adoption process, the flexibility of the amendment process, and the specificity of the document are crucial features promoting endurance.

The Prisoners' (Plea Bargain) Dilemma

Mon, 19 Nov 2007 00:00:00 +0000

How can a prosecutor, who has only limited resources, credibly threaten so many defendants with costly and risky trials and extract plea bargains involving harsh sentences? Had defendants refused to settle, many of them would not have been charged or would have escaped with lenient sanctions. But such collective stonewalling requires coordination among defendants, which is difficult if not impossible to attain. Moreover, the prosecutor, by strategically timing and targeting her plea offers, can create conflicts of interest among defendants, frustrating any attempt at coordination. The substantial bargaining power of the resource-constrained prosecutor is therefore the product of the collective action problem that plagues defendants. This conclusion suggests that, despite the common view to the contrary, the institution of plea bargains may not improve the well-being of defendants. Absent the plea bargain option, many defendants would not have been charged in the first place....

Efficient Breach Theory Through the Looking Glass

Wed, 7 Nov 2007 00:00:00 +0000

Efficient Breach Theory Through the Looking Glass

The Effect of Judicial Ideology on Intellectual Property Cases

Mon, 15 Oct 2007 00:00:00 +0000

The Effect of Judicial Ideology on Intellectual Property Cases

How Does Law Affect Finance? An Examination of Financial Tunneling in an Emerging Market

Fri, 12 Oct 2007 00:00:00 +0000

How Does Law Affect Finance? An Examination of Financial Tunneling in an Emerging Market

Does Shareholder Voting Reflect Shareholder Preferences?

Wed, 10 Oct 2007 00:00:00 +0000

Does Shareholder Voting Reflect Shareholder Preferences?

Should Corporate Disclosure be Deregulated? Lessons from the US

Wed, 5 Sep 2007 00:00:00 +0000

Should Corporate Disclosure be Deregulated? Lessons from the US

Market versus Non-Market Assignment of Initial Ownership

Thu, 30 Aug 2007 00:00:00 +0000

Market versus Non-Market Assignment of Initial Ownership

The Quality of Law: Judicial Incentives, Legal Human Capital and the Evolution of Law

Thu, 23 Aug 2007 00:00:00 +0000

The Quality of Law: Judicial Incentives, Legal Human Capital and the Evolution of Law

A Welfarist Approach to Disabilities

Fri, 17 Aug 2007 00:00:00 +0000

A Welfarist Approach to Disabilities

Political Cycles of Rulemaking: An Empirical Portrait of the Modern Administrative State

Fri, 10 Aug 2007 00:00:00 +0000

Political Cycles of Rulemaking: An Empirical Portrait of the Modern Administrative State

Gender and the Legal Profession: An Empirical Study of the University of Michigan Law Alumni Data, 1967-2000

Wed, 11 Apr 2007 00:00:00 +0000

Gender and the Legal Profession: An Empirical Study of the University of Michigan Law Alumni Data, 1967-2000

Interpreting Boilerplate

Fri, 6 Apr 2007 00:00:00 +0000

Interpreting Boilerplate

Enforcing Self-Dealing Constraints on Dominant Shareholders in Europe

Mon, 19 Mar 2007 00:00:00 +0000

Enforcing Self-Dealing Constraints on Dominant Shareholders in Europe

How Big a Problem is U.S. Corporate Governance?

Mon, 12 Mar 2007 00:00:00 +0000

How Big a Problem is U.S. Corporate Governance?

Copyright and Public Good Economics: A Misunderstood Relation

Tue, 6 Mar 2007 00:00:00 +0000

The conventional approach to analyzing the economics of copyright is based on the premise that copyrightable works constitute pure public goods, which is generally modeled by assuming that such works are nonexcludable and that the marginal cost of making additional copies of them is essentially zero. These assumptions in turn imply that markets systematically produce too few copyrightable works and underutilize those that are produced. In this Article, Professor Christopher Yoo argues that the conventional approach is based on a fundamental misunderstanding. A close examination of the foundational literature on public good economics reveals that the defining characteristic of public goods is the need to satisfy an optimality criterion known as the “Samuelson condition,” which suggests that the systematic bias toward underproduction is the result of the inability to induce consumers to reveal their preferences rather than nonexcludability and zero marginal cost. Reframing...

Optimal Property Rights in Financial Contracting

Mon, 5 Mar 2007 00:00:00 +0000

Optimal Property Rights in Financial Contracting

Establishing Ownership: First Possession versus Accession

Mon, 12 Feb 2007 00:00:00 +0000

Establishing Ownership: First Possession versus Accession

Who Blows The Whistle on Corporate Fraud?

Tue, 6 Feb 2007 00:00:00 +0000

What external control mechanisms are most effective in detecting corporate fraud? To address this question we study in depth all reported cases of corporate fraud in companies with more than 750 million dollars in assets between 1996 and 2004. We find that fraud detection does not rely on one single mechanism, but on a wide range of, often improbable, actors. Only 6% of the frauds are revealed by the SEC and 14% by the auditors. More important monitors are media (14%), industry regulators (16%), and employees (19%). Before SOX, only 35% of the cases were discovered by actors with an explicit mandate. After SOX, the performance of mandated actors improved, but still account for only slightly more than 50% of the cases. We find that monetary incentives for detection in frauds against the government influence detection without increasing frivolous suits, suggesting gains from extending such incentives to corporate fraud more generally.

The (Hidden) Risk of Opportunistic Precautions

Thu, 1 Feb 2007 00:00:00 +0000

The (Hidden) Risk of Opportunistic Precautions

Limited Liability and the Organization of Legal Services

Wed, 17 Jan 2007 00:00:00 +0000

Limited Liability and the Organization of Legal Services

Terrorism Insurance: Rethinking the Government's Role

Fri, 12 Jan 2007 00:00:00 +0000

Terrorism Insurance: Rethinking the Government's Role

Just How Much Do Individual Investors Lose by Trading?

Thu, 4 Jan 2007 00:00:00 +0000

Just How Much Do Individual Investors Lose by Trading?

Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis

Tue, 2 Jan 2007 00:00:00 +0000

This paper analyses how governance or institutional quality and tax morale affect the shadow economy using an international country panel and also within country data. The literature strongly emphasizes the quantitative importance of these factors to understand the level and changes of shadow economy. However, the limited numbers of investigations use cross-sectional country data with a relatively small number of observations and hardly any paper has investigated tax morale and provides evidence using within country data. Using more than 25 proxies that measure governance and institutional quality we find strong support that its increase leads to a smaller shadow economy. Moreover, an increase in tax morale reduces the size of the shadow economy.

The Beginnings of Economic Modernization in the Middle East: Legal Impact of Unequal Trade Treaties

Mon, 13 Nov 2006 00:00:00 +0000

The Beginnings of Economic Modernization in the Middle East: Legal Impact of Unequal Trade Treaties

Intellectual Property for Market Innovation

Thu, 2 Nov 2006 00:00:00 +0000

Intellectual Property for Market Innovation

Transnational Tort Litigation as a Trade and Investment Issue

Tue, 17 Oct 2006 00:00:00 +0000

Transnational Tort Litigation as a Trade and Investment Issue

The General Welfare Clause and the Theory of Public Goods

Mon, 9 Oct 2006 00:00:00 +0000

The General Welfare Clause and the Theory of Public Goods

The Limits of Hedge Fund Activism

Fri, 6 Oct 2006 00:00:00 +0000

The Limits of Hedge Fund Activism

Power and Payouts in the Sale of Startups

Fri, 8 Sep 2006 00:00:00 +0000

Paper#1

Treating Clinical Trials as a Public Good: The Most Logical Reform

Fri, 1 Sep 2006 00:00:00 +0000

Treating Clinical Trials as a Public Good: The Most Logical Reform