Identifying Perverse Incentives in Buyer Profiling on Online Trading Platforms

With advance machine learning and artificial intelligence models, the capability of online trading platforms to profile consumers to identify and understand their needs has substantially increased. In this study, we use an analytical model to study whether these platforms have an incentive to profile their customers as accurately as possible. We find that “payments-for-transactions” platforms (i.e., platforms that charge for transactions that occur on the platform) indeed have such incentives to accurately profile the customers. However, surprisingly, “payments-for-discoveries” platform (i.e., platforms that charge customers for discoveries) have a perverse incentive to deviate from accurate consumer profiling. Our study provides insights into underlying mechanisms that drive this perverse incentive and discuss circumstances that lead to such a perverse incentive.

Dismantling Policing for Profit: How to Build on Missouri's Post-Ferguson Court Reforms

This Note argues that legal reforms enacted after the 2014 Ferguson, Missouri uprising are insufficient to address the problem of using courts as revenue generators and the related problem of predatory policing. Reforms to date have merely capped how much money towns can raise from their courts; they have not fixed the perverse incentive problem, which allows towns like Ferguson to extract wealth from vulnerable, low-income residents through the court system. This Note argues that towns should be required to remit the money their courts raise to a state education fund, which puts legal separation between the entity collecting the money and the beneficiary of those funds. This Note considers two provisions of the Missouri Constitution, one which could be read as requiring such a reform, and another which could be read as prohibiting such a reform. This Note compares Missouri’s constitutional provisions to a similar North Carolina constitutional provision and concludes that the Missouri Constitution provides ample support for reformers to advocate for this Note’s proposed reform. Finally, this Note offers a roadmap for the steps needed to build political and legal support for the reform.

Does Medicare Reimbursement Drive Up Drug Launch Prices?

Medicare reimburses health care providers for the drugs they administer. Since 2005, it has reimbursed based on the past price of the drug. Reimbursement on past prices could motivate manufacturers to set higher launch prices because providers become less sensitive to price and because provider reimbursement is higher if past prices were higher. Using data on drug launch prices between 1999 and 2010, we estimate that reimbursement based on past prices caused launch prices to rise dramatically. The evidence is consistent with the 2018 claim from Medicare's administrator that it “creates a perverse incentive for manufacturers to set higher prices.”

Rewarding the quantity of peer review could harm biomedical research

Voluntary peer review is generally provided by researchers as a duty or service to their disciplines. They commit their expertise, knowledge and time freely without expecting rewards or compensation. Peer review can be perceived as a reciprocal mission that aims to safeguard the quality of publications by helping authors improve their manuscripts. While voluntary peer review adds value to research, rewarding the quantity or the volume of peer review is likely to lure academics into providing poor quality peer review. Consequently, the quantity of peer review may increase, but at the expense of quality, which may lead to unintended consequences and might negatively affect the quality of biomedical publications. This paper aims to present evidence that while voluntary peer review may aid researchers, pressurized peer review may create a perverse incentive that negatively affects the integrity of the biomedical research record. We closely examine one of the proposed models for rewarding peer review based on the quantity of peer review reports. This article also argues that peer review should remain a voluntary mission, and should not be prompted by the need to attain tenure or promotion.

Promises Unfulfilled: How Investment Arbitration Tribunals Mishandle Corruption Claims and Undermine International Development

In recent years, the investment-arbitration and anti-corruption regimes have been in tension. Investment tribunals have jurisdiction to arbitrate disputes between investors and host states under international treaties that provide substantive protections for private investments. But these tribunals will typically decline to exercise jurisdiction over a dispute if the host state asserts that corruption tainted the investment. When tribunals close their doors to ag-grieved investors, tribunals increase the risks for investors and thus raise the cost of international investment. At the same time, the decision to decline jurisdiction creates a perverse incentive for host states to turn a blind eye to corruption. Together, these distorted incentives hinder developmental goals and undermine the fight against corruption. To correct these problems, this Note proposes a framework to guide arbitral tribunals when faced with a corruption-tainted dispute. Specifically, this Note argues that when both parties participate in corruption, arbitral tribunals should invoke equitable estoppel to accept jurisdiction over the dispute. When considering the corruption claims, investment tribunals should use a contributory-fault approach that evaluates each party’s role in the corrupt act to determine the final award. This framework not only helps align the investment-arbitration and anticorruption regimes but also advances developmental objectives.

Three Theories of Copyright in Ratings

Are ratings copyrightable? The answer depends on what ratings are. As a history of copyright in ratings shows, some courts treat them as unoriginal facts, some treat them as creative opinions, and some treat them as troubling self-fulfilling prophecies. The push and pull among these three theories explains why ratings are such a difficult boundary case for copyright, both doctrinally and theoretically. The fact-opinion tension creates a perverse incentive for raters: the less useful a rating, the more copyrightable it looks. Self-fulfilling ratings are the most troubling of all: copyright’s usual balance between incentives and access becomes indeterminate when ratings shape reality, rather than vice versa. All three theories are necessary for a complete understanding of ratings.

Is “no net loss of biodiversity” a good idea?

This chapter explores biodiversity offsetting as a tool used to achieve “no net loss” of biodiversity. Unfortunately, no-net-loss offsetting can be—and often is—unintentionally designed in a way that inevitably results in ongoing biodiversity decline. Credit for offset sites is given in proportion to the assumed loss that would happen at those sites if not protected, and this requires clear baselines and good estimates of the risk of loss. This crediting calculation also creates a perverse incentive to overstate—or even genuinely increase—the threat to biodiversity at potential offset sites, in order to generate more offset “credit” that can then be exchanged for damaging actions elsewhere. The phrase “no net loss,” when used without an explicit frame of reference and quantified counterfactual scenario, is meaningless, and potentially misleading. Conservation scientists have a core role in interpreting, communicating, and improving the robustness of offset policy.

Dr. Lal Pathlabs (A)

Diagnostics services in India were growing at 20% annually with billing of USD 3.4 billion. With WTO's GATS, foreign competition was arising. Dr. Lal PathLabs had formidable brand recognition and Dr. Arvind Lal was wondering whether to accept private equity and induct management professionals to keep pace with competitors through acquisitions or greenfield or sell out. He worried over loss of proprietary control. The industry practice of incentivizing doctors for referrals meant that acquisitions brought perverse incentive systems. The choice of compromising ethics or inventing another business model had to be made alongside whether to expand in India or abroad.

Decentralization, Corruption, and Market Structure

This chapter provides further analysis of organizational incentive structures, linking the behavior of individuals to the larger macro structure of trade. The analysis here explores the unintended consequences of the private trade allowances. The unique private trade allowances of the English Company had created a perverse incentive for the captains and crew. Those who were engaged in the private trade (which was most employees) had an incentive to illegally extend their voyages in the East and seek out new commercial opportunities. Company officials condemned this practice; however it had an unexpected impact on the firm. While “losing the season” to extend their voyages, captains took the risks necessary to directly link distant markets within the Company network. Through opportunistic and malfeasant behavior, they wove the many regions and ports into one multilateral commercial network.