Category Archives: Law and Economics
Steven Shavell, ‘Settlement of Litigation May Increase or Decrease Deterrence and Social Welfare’
ABSTRACT Although the obvious effect of settlement is to save litigants the costs of trial, settlement also influences deterrence – and for two reasons. First, because settlement is agreed upon by plaintiffs, it raises their expected return from litigation and thus the probability of suit. This augments deterrence. Second, because settlement is agreed upon by […]
Aggarwal and Feibelman, ‘Defining the Field of Law and Macroeconomics: A Framework from International Monetary Law’
ABSTRACT This Article proposes an analytical framework for defining the contours of the emerging field of law and macroeconomics drawing on the International Monetary Fund’s principle of ‘macro-criticality’. Such a framework can help steer scholarly debate toward a clearer understanding of the relationship between law and the economy and inform policymaking within that domain. In […]
Bao, Dukes and Xiao, ‘Puffery as Occlusion: A Story of Rational Inattention’
ABSTRACT We ask whether non-persuasive puffery can affect purchase decisions. This question is motivated by legal strategies that are used by marketers accused of false advertising and rely on a presumption that consumers dismiss puffery as sales bluster. But if consumers dismiss puffery, then why is it such a staple of marketing communication? In contrast […]
Kim, Kim and Park, ‘The Liability Gap in Sequential Accidents: Why and When Standard Tort Rules Fail’
ABSTRACT When a primary event creates potential harm that victims can mitigate, a liability gap arises under negligence: firms pay only residual harm, not victims’ mitigation costs. This gap causes firms to underinvest in precaution and victims to underprotect – and paradoxically widens as victims become more effective. The gap also distorts ex post monitoring: […]
Enrico Baffi, ‘The Regulation of Contracts Entered under Coercion: Positive Law in the Light of Efficiency and Fairness’
ABSTRACT This Article examines the regulation of contracts formed under coercive conditions, focusing on cases in which consent is formally voluntary but substantively constrained by duress, necessity, or dependence. It argues that doctrines traditionally justified in terms of fairness or protection of the weaker party are best understood, and more coherently interpreted, through the lens […]
Lev Goukassian, ‘TML Smart Contracts: Automating Ethics and Accountability on the Blockchain’
ABSTRACT This whitepaper details the economic and operational enforcement layer of the Ternary Moral Logic (TML) framework. Addressing the ‘Implementation Gap’ in AI ethics, this paper demonstrates how to replace voluntary compliance with automated, smart-contract-based enforcement mechanisms. The analysis defines the economic game theory behind: The Penalty Enforcement Contract: A deterministic mechanism for executing financial […]
Engstrom and Holland-Stergar, ‘Competition and Contingency Fees’
ABSTRACT A debate has long raged concerning whether the contingency fee market for legal services is or is not competitive. The debate has been fierce because its stakes are sky high. If the market is competitive, current efforts to cut or cap contingency fees are clearly wrong-headed. If the opposite, then at least some efforts […]
Singh and Schaefer, ‘A new case for a higher standard of care: The uncompensated tertiary and third-party costs’
ABSTRACT The standard economic analysis of liability rules mainly focuses on the direct accident costs. However, accidents often create other costs which are often as large as the direct accident costs and occasionally much higher. In this note, we present a simple model of the tertiary and third-party costs created by accidents. We show that […]
Houba and Motchenkova, ‘Personalized pricing and consumer privacy’
ABSTRACT Advances in data collection enable firms to use consumer information for personalized pricing. In Clavorà Braulin’s (2023) symmetric two-dimensional model, this reduces prices and profits, while partial privacy yields the highest profits. Extending the model to asymmetric firms and vertically differentiated products, we show that these results are not robust under sizable asymmetries. Partial […]
Enrico Baffi, ‘Public Standard Contract as Benchmark and Informed Opt-Out’
ABSTRACT This article proposes a market design mechanism for standard contracts in relationhips between firms and consumers, based on the preparation, by a public authority, of a sectoral standard contract intended to serve as a benchmark. The standard is constructed in such a way as to maximize the expected surplus for the majority of consumers, […]