Category Archives: Law and Economics

Friehe and Gabuthy, ‘On Plaintiff Preferences Regarding Methods of Compensating Lawyers’

ABSTRACT This paper analyzes a litigation contest in which the plaintiff’s lawyer and the defendant choose effort. The plaintiff selects the relative importance of a contract component related to the judgment (similar to contingent fees) and a component related to the lawyer’s efforts (similar to conditional fees) to ensure lawyer participation and guide the lawyer’s […]

Emily Kadens, ‘Cheating Pays’

ABSTRACT Common private-ordering theories predict that merchants have an incentive to act honestly because if they do not, they will get a bad reputation and their future businesses will suffer. In these theories, cheating is cheating whether the cheat is big or small. But while reputa­tion-based private ordering may constrain the big cheat, it does […]

Dana and Wiseman, ‘Fracking as a Test of the Demsetz Property Rights Thesis’

ABSTRACT Since its introduction in 1967, the account of property rights formation by Harold Demsetz has pervaded the legal and economic literature. Demsetz theorized that as a once-abundant, commonly-shared resource becomes more valuable and sought-after, users will move to more clearly define property rights in the resource. Despite the high transaction costs of this approach, […]

Vincent Buccola, ‘Bankruptcy’s Cathedral: Property Rules, Liability Rules, and Distress’

ABSTRACT What justifies corporate bankruptcy law in the modern economy? For forty years, economically oriented theorists have rationalized bankruptcy as an antidote to potential coordination failures associated with a company’s financial distress. But the sophistication of financial contracting and the depth of capital markets today threaten the practical plausibility, if not the theoretical soundness, of […]

Hornuf and Klöhn, ‘Do judges hate speculators?’

ABSTRACT Historically, people have often expressed negative feelings toward speculators, a sentiment that might have even been reinforced since the latest financial crisis, during which taxpayer money was warranted or spent to bail out reckless investors. In this paper, we conjecture that judges may also have anti-speculator sentiment, which might affect their professional decision making. […]

Murtazashvili and Murtazashvili, ‘The Political Economy of Legal Titling’

ABSTRACT The libertarian case for legal titling is that formalization of the economic (de facto) rights of those who own land and buildings improves prospects for capitalism and, ultimately, development. Although all rich countries have private property rights, we argue that the success of legal titling depends on a certain kind of state – what […]

Alon Cohen, ‘Informational Negligence Law’

ABSTRACT This article offers an analysis of negligence law in an environment with asymmetric information and costly signaling. We consider three possible variations of the negligence doctrine, based on its two elements – the standard of care and damages. We find that accounting for signaling costs affects the social desirability of the negligence rule. In […]

Matthew Seligman, ‘Moral Diversity and Efficient Breach’

ABSTRACT Most people think it is morally wrong to breach a contract. But sophisticated commercial parties, like large corporations, have no objection to breaching contracts and paying the price in damages when doing so is in their self-interest. The literature has ignored the profound legal, economic, and normative implications of that asymmetry between individuals’ and […]

Klaus Ulrich Schmolke, ‘Economics of Remedies – The Perspective of Corporate Law’

ABSTRACT From a law-and-economics perspective the primary goal of (legal) remedies is to enhance social welfare by minimising social costs. Remedies help to achieve cost internalisation since they provide means by which third parties who are negatively affected by the respective action are entitled to veto the action (property rule) or to claim compensation for […]

D’Antoni and Tabbach, ‘The Complementary Role of Liability and Safety Regulation’

ABSTRACT This article deals with the control of hazardous activities in situations where potential victims can affect their exposure to risk. Economists have generally considered ex ante regulation (safety standards) to be a substitute for ex post policies (exposure to tort liability) in order to control externalities. We show that when the victim’s compensation is […]