Category Archives: Law and Economics
Vibhu Vikramaditya, ‘The Reconsideration of Coasean Social Cost’
ABSTRACT This paper critically examines the inherent limitations in Coase’s interpretation of social cost and property rights, arguing for a more nuanced understanding that recognizes the integral role of liability rules in shaping socioeconomic activities. Coase’s conception, while instrumental in specific scenarios of resource allocation, exhibits significant oversights. It reduces the complexity of property rights […]
‘Various Problems with Liquidated Damages’
I use Judge Posner’s opinion in Lake River Corp v Carborundum Co to teach liquidated damages and penalties. It’s a typical Judge Posner opinion. He provides policy arguments for and against the enforcement of liquidated damages provisions, even if they impose a penalty on the breaching party. Judge Posner makes the compelling freedom of contract/anti-paternalist […]
Buccafusco, Hemel and Talley, ‘The Price of Fairness’
ABSTRACT The COVID-19 pandemic led to acute supply shortages across the country as well as concerns over price increases amid surging demand. In the process, it reawakened a debate about whether and how to regulate ‘price gouging’ – a controversy that continues as inflation has accelerated even as the pandemic abates. Animating this debate is […]
Landeo, Nikitin and Izmalkov, ‘Optimal Civil Justice Design’
ABSTRACT We study the optimal civil justice design in a two-sided private information environment. The fundamental goals of the civil justice system and the optimal production of evidence are considered in our design. We characterize the optimal civil justice mechanism, and demonstrate that this mechanism maximizes social welfare by providing access to justice to the […]
Massimiliano Vatiero, ‘Do Smart Contracts Incur Higher Transaction Costs than Traditional Contracts?’
ABSTRACT A smart contract is an agreement enforced by blockchain technology. It supposedly allows the parties involved to conduct transactions more efficiently than a traditional contract, which is based on legal (costly) enforcement. This chapter challenges this claim. Given the need for an efficiency-enhancing adaptation of institutional arrangements – a chief problem of Oliver Williamson’s […]
James Hicks, ‘Do Patents Drive Investment in Software?’
ABSTRACT In the wake of a quartet of Supreme Court decisions which disrupted decades of settled law, the doctrine of patentable subject matter is in turmoil. Scholars, commentators, and jurists continue to disagree sharply over which kinds of invention should be patentable. In this debate, no technology has been more controversial than software. Advocates of […]
Cyndi Xinyu Hou, ‘Limited Liability: Playing It Safe or Going Big?’
ABSTRACT Does limited liability on damages improve social efficiency? I show that optimal liability rules trades off tort damages against benefits to outside stakeholders. Full liability promotes care but raises marginal costs, inducing less-than-efficient scale. Limited liability enhances scale but reduces care, proving more efficient than full liability when outside stakeholder value is high. As […]
Baker and Parameswaran, ‘Reasonableness’
ABSTRACT This paper investigates what makes behavior reasonable. Two actors exert effort towards a goal. The planner knows each actor’s cost of effort. The actors know their own cost, but not their counter-party’s. We find that the planner will not base incentives on the actors’ cost of care (information that is free and accurate). Instead, […]
Zenichi Shishido, ‘Incentive Bargaining in Maker-Supplier Transactions and the Role of Written Contracts’
ABSTRACT Long and specific Contracts in the US and short and ambiguous contracts in Japan are a stereotypical comparison of the contracting practices in both countries. Such characteristics of written contracts are understood as sticky. Based on a semi-structured interview of Japanese auto and electronics industries, this article demonstrates such understandings are not necessarily erroneous […]
Teichman, Tor and Zamir, ‘If You Can’t Beat Them, Join Them: Richard Posner and Behavioral Law and Economics’
ABSTRACT Since its publication in 1973, Economic Analysis of Law (the Treatise) by Richard Posner has been recognized as the canonical treatise in the field. Given this status, observing changes over time in the different editions of the book can highlight substantial and methodological shifts in the area. On this backdrop, this brief essay highlights […]