Category Archives: Law and Economics

Louis Kaplow, ‘Optimal Design of Private Litigation’

Abstract: This article translates and extends Becker (1968) from public law enforcement to private litigation by examining optimal legal system design in a model with private suits, signals of case strength, court error, and two types of primary behavior: harmful acts that may be deterred and benign acts that may be chilled. The instruments examined […]

Robin Malloy, ‘Law, Market, and Marketization’

Abstract: Marketization is a process occurring in many transitional economies as countries seek to adjust their legal systems to facilitate broader market participation while expanding global trade. This essay sets out one way of understanding this process by focusing on the relationship among, law, markets, and marketization. It identifies and explains basic legal requirements for […]

Zachary Liscow, ‘Is Efficiency Biased?’

Abstract: The most common underpinning of economic analysis of the law has long been the goal of efficiency (ie, choosing policies that maximize people’s willingness to pay), as reflected in economic analysis of administrative rulemaking, judicial rules, and proposed legislation. Current thinking is divided on the question whether efficient policies are biased against the poor, […]

Fennell and McAdams, ‘Inverted Theories’

Abstract: This essay makes the case for ‘inverting’ popular versions of certain theories widely used in legal analysis. Inversion begins with the observation that the assumptions underlying a given theory are substantively false. But rather than reject the theory outright, the theory inverter sees something valuable in the structure of the theory’s logic, and looks […]

‘More Failed Nudges: Evidence of Ineffective “Behaviorally Informed” Disclosures’

Enrique Seira, Alan Elizondo and Eduardo Laguna-Müggenburg, 9 American Economic Journal: Economic Policy 277 (2017). As Truth-in-Lending laws are celebrating half a century of failure, and as consumers – especially those with low income – continue to make disastrous credit decisions, lawmakers are looking to reboot the disclosure paradigm. Energized by insights from behavioral economics, […]

Cary Coglianese, ‘The Limits of Performance-Based Regulation’

Abstract: Performance-based regulation is widely heralded as a superior approach to regulation. Rather than specifying the actions regulated entities must take, performance-based regulation instead requires the attainment of outcomes and gives flexibility in how to meet them. Despite nearly universal acclaim for performance-based regulation, the reasons supporting its use remain largely theoretical and conjectural. Owing […]

Luigi Franzoni, ‘Liability Law under Scientific Uncertainty’

Abstract: This article investigates the implications of uncertainty aversion on optimal liability law. Of special interest is the case in which the causal link between conduct and harm is not known with certainty, as is frequently the case with toxic torts. Under negligence, uncertainty aversion calls for a higher standard of care if, and only […]

Givati and Kaplan, ‘Over-Reliance under Contractual Disgorgement’

Abstract: A well-known result in economic analysis of contract law is that expectation damages lead to over-reliance by the non-breaching party. Recently, the contractual disgorgement remedy has attracted much attention from scholars, yet no attempt has been made to analyze reliance investment under this remedy. In this article, we develop a model showing that under […]

‘The Economic Analysis of Law’

“Economic analysis of law applies the tools of microeconomic theory to the analysis of legal rules and institutions. Ronald Coase [1960] and Guido Calabresi [1961] are generally identified as the seminal articles but Commons [1924] and Hale [1952] among others had brought economic thinking to the study of law in the 1910s and 1920s. Richard […]

Florian Baumann, ‘Product Liability in Markets for Vertically Differentiated Products’

Abstract: This article shows that shifting losses from consumers with heterogeneous harm levels to vertically differentiated duopolists increases product safety levels, while narrowing the degree of product differentiation. Our setup features observable (but possibly nonverifiable) product safety levels and firms subject to strict liability according to a parametric liability specification. Firms’ expected liability payments depend […]