Review of Law & Economics
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428
(FIVE YEARS 59)

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18
(FIVE YEARS 2)

Published By Walter De Gruyter Gmbh

1555-5879, 2194-6000

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Koji Domon

Abstract Content industries have several profit sources that positively interact with one another, and piracy affects them not only negatively but also positively. For copyright holders, choosing to allow piracy depends upon its total external effects. This paper proves that in such case the profit function is convex with respect to the level of enforcement. This paper shows a convex profit function with respect to the level of enforcement. The convexity leads to a corner solution of optimal enforcement for copyright holders. Which corner solution is selected depends on the relative size of the sub-market, and no enforcement is profitable if the submarket size is relatively large. This result compensates for a shortcoming of discussions that assume only two options regarding the level of enforcement, zero or perfect enforcement.


2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Iwan Bos

Abstract Motivated by some recent examples, this paper employs a model of public law enforcement to explain why it may not be in society’s interest to send criminals to prison. We establish two main findings. First, independent of the lawbreaker’s societal position, imprisonment is suboptimal when the harm from the illegal activity is sufficiently small. Second, for a given level of harm, imprisonment is suboptimal when the lawbreaker is sufficiently important. This latter result thus provides a rationale for why some parties are taken to be ‘too big to jail’.


2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Mario J. Rizzo

Abstract The application of behavioral economics to law and economics has taken a paternalistic turn. Behavioralists believe that the fundamental assumptions regarding individual behavior in standard theory do not reflect reality. If individuals are not “rational” in the standard economic sense, then there will be decisionmaking failures: people cannot be relied upon to make individually optimal decisions and thus to maximize welfare as they see it. This Article is organized as follows. Part One is a prelude and gives context. Part Two discusses the fundamental normative standard in behavioral public policy: true preferences. I then proceed to outline the causes of the divergence between true preferences and actual observed preferences. Part Three analyzes some of the knowledge problems is ascertaining the presence of cognitive and behavioral biases. Part Four presents a case study of the difficulties of behavioral policy analysis in the area of consumer credit. Part Five concludes.


2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Thomas S. Ulen

Abstract This article explores some behavioral findings that are relevant to three areas of contract: formation, performance, and remedies. I compare the rational choice theory analysis of various aspects of contract law with how behavioral findings lead to a change in our understanding of that area of law. A penultimate section considers several criticisms of behavioral economics. A concluding section calls for altering some settled understandings of contract law to accommodate behavioral results and for further research about some still uncertain aspects of contracting.


2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Barbara Luppi

Abstract Empirical and experimental evidence shows that individuals exhibit behavioral biases in their decision-making processes that depart from the full rationality paradigm. This paper discusses the effectiveness of alternative debiasing strategies, designed to induce socially preferable outcomes. Following Jolls, C. and Sunstein, C.R. (2006). Debiasing through law. J. Leg. Stud. 35: 199–242, this paper examines legal strategies that aim at “debiasing through law”, attempting to reduce or eliminate boundedly rational behavior. Alternatively, policymakers can implement “insulating” legal strategies that separate the outcome from the biased behavior, without attempting to eradicate behavioral biases from the decision-making process. This paper compares these strategies in many areas, such as tort law, consumer safety law, and property law.


2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Giuseppe Dari-Mattiacci ◽  
Guilherme de Oliveira

Abstract Slavery has been a long-lasting and often endemic problem across time and space, and has commonly coexisted with a free-labor market. To understand (and possibly eradicate) slavery, one needs to unpack its relationship with free labor. Under what conditions would a principal choose to buy a slave rather than to hire a free worker? First, slaves cannot leave at will, which reduces turnover costs; second, slaves can be subjected to physical punishments, which reduces enforcement costs. In complex tasks, relation-specific investments are responsible for high turnover costs, which makes principals prefer slaves over workers. At the other end of the spectrum, in simple tasks, the threat of physical punishment is a relatively cheap way to produce incentives as compared to rewards, because effort is easy to monitor, which again makes slaves the cheaper alternative. The resulting equilibrium price in the market for slaves affects demand in the labor market and induces principals to hire workers for tasks of intermediate complexity. The available historical evidence is consistent with this pattern. Our analysis sheds light on cross-society differences in the use of slaves, on diachronic trends, and on the effects of current anti-slavery policies.


2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Doron Teichman ◽  
Eyal Zamir

Abstract The economic analysis of law assumes that court decisions are key to incentivizing people and maximizing social welfare. This article reviews the behavioral literature on court decision making, and highlights numerous heuristics and biases that impact judges and jurors and cause them to make decisions that diverge from the social optimum. In light of this review, the article analyzes some of the institutional features of the court system that may help minimize the costs of biased decisions in the courts.


2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Christoph Engel

Abstract Adopting the paradigms, findings and tools of behavioral economics has opened a promising avenue for legal research. This article sketches the broader framework within which the papers assembled in this special issue may be placed.


2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Daniel Pi

Abstract Skeptics of rational choice theory have long predicted that behavioral economics would radically transform the legislation, adjudication, and analysis of law. Using tort law as an exemplar, this Article maps out the narrow set of conditions where substantive law can be modified to accommodate irrational decision-makers. Specifically, this Article demonstrates that if injurers are systematically biased, and the due care standard can be expressed quantitatively, and victims are unable to take meaningful precautions, then imposing punitive damages can induce irrational injurers to exercise efficient precautionary care. In all other cases, it is better that the law adopt a presumption of rationality, regardless whether individuals behave rationally in fact.


2021 ◽  
Vol 0 (0) ◽  
Author(s):  
William C. Bunting

Abstract This article models the duty of care as a response to moral hazard where the principal seeks to induce effort that is costly to the agent and unobservable by the principal. The duty of loyalty, by contrast, is modeled as a response to adverse selection where the principal seeks truthful disclosure of private information held by the agent. This model of corporate loyalty differs importantly with standard adverse selection models, however, in that the principal cannot use available contracting variables as a screening mechanism to ensure honest disclosure and must rely upon the use of an external third-party audit technology, such as the court system. This article extends the model to the issue of corporate compliance and argues that the optimal judicial approach would define the duty to monitor as a subset of due care – and not loyalty – but hold that the usual legal protections provided for due care violations no longer apply.


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