Category Archives: Law and Economics
Dupont and Karpoff, ‘A theory of social capital and trust’
ABSTRACT We develop a model in which social capital builds trust, decreases misconduct, and facilitates economic transactions. Social capital refers to the value of social and psychological benefits from performing in accord with contractual promises. It reflects a common component via shared culture and an idiosyncratic component reflecting individual moral values. Opportunistic behavior is disciplined […]
Calderón Gómez, Talisse and Weymark, ‘Bruni and Sugden on Market Virtues’
ABSTRACT According to classical liberalism, markets are instruments for the mutually advantageous voluntary exchange of goods and services among individuals who have conflicting interests. Some critics have used a virtue ethics understanding of behavior in markets to call for moral limits to markets because this classical view does not respect the internal value of human […]
Demougin and Bental, ‘Procedural vs Substantive Approaches in Non-Comprehensive Contracts’
ABSTRACT In this study, we examine two adjudication methods designed to resolve disputes between principals and agents concerning bonus payments in relationships characterized by moral hazard and where the parties have been forced to use soft, imprecise, and subjective information to align incentives. The first method is a procedural approach where the court applies to […]
Roy Baharad, ‘Contract Remedies and Search Efforts’
ABSTRACT Contract theorists routinely assume that opportunities for efficient breach are exogeneous. This prompts the conventional approach to contract remedies, according to which expectation damages are preferred to the disgorgement rule: when ex-post renegotiations are unfeasible, the former regime facilitates efficient breach while the latter deters it. In this paper, I offer a simple model […]
Benjamin Hardman, ‘Torts, Tech, and Third Parties: Applying Causation Principles and Secondary-Liability Safe-Harbor Logic to Fair Use Factor Four’
ABSTRACT This paper offers a wholly novel framework for fair-use market-harm analysis by weaving together three foundational doctrines. It begins with tort-law causation, which ensures that legal responsibility aligns with moral intuition and practical fairness by tracing liability only to those actions that both factually cause harm and foreseeably produce it. Hardman, Benjamin, Torts, Tech, […]
Portela, Schwartz and Aparicio Garcia, ‘Litigation Risk and the Valuation of Legal Claims: A Real Option Approach’
ABSTRACT Legal claims are increasingly being considered as an alternative asset class, however, there appears to be a lack of a standard methodology for valuing litigation risk. This paper proposes a dynamic real options framework for the valuation of legal claims, explicitly incorporating the uncertainty and sequential nature of litigation processes. We develop a continuous-time […]
Demougin and Bental, ‘Procedural vs Substantive Approaches in Non-Comprehensive Contracts’
ABSTRACT In this study, we examine two adjudication methods designed to resolve disputes between principals and agents concerning bonus payments in relationships characterized by moral hazard and where the parties have been forced to use soft, imprecise, and subjective information to align incentives. The first method is a procedural approach where the court applies preponderance-of-the-evidence […]
Luppi, Parisi, Pietro Matina and Santese, ‘Promisee’s Duty of Cooperation’
ABSTRACT This paper explores the optimal default configuration of the promisee’s duty of cooperation in situations where the promisee’s role in the performance of a contract is not merely passive but can actively affect the probability of performance. This paper contributes to the law and economics literature (Cooter & Porat, 2004; Porat, 2009) by analyzing […]
Felix Chang, ‘Economic Analysis of Trust Law’
ABSTRACT This chapter analyzes trusts from a law and economics perspective. It begins with John Langbein’s work on contractarian foundations and Robert Sitkoff’s agency costs theory – two frameworks that highlight the relational nature of trusts. The chapter then explores Henry Hansmann and Ugo Mattei’s thesis that the trust’s major contribution has been its ability […]
Barlevy and Xavier, ‘A Model of Charles Ponzi’
ABSTRACT We develop a model of Ponzi schemes with asymmetric information to study Ponzi frauds. A long-lived agent offers to save on behalf of short-lived agents at a higher rate than they can earn themselves. The long-lived agent may genuinely have a superior savings technology, but may be an imposter trying to steal from short-lived […]