People often appear to use irrelevant information in forming judgments about others. Using survey experiments, we show that seemingly irrelevant facts may actually be informative of actors’ choices, which third parties can use to update their beliefs. Specifically, we show that subjects’ perceived severity and recommended punishment for offenses are significantly increasing in the number of lawyers

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Fine reductions for self-reported offenses entail a potential trade-off. On the one hand, inducing offenders to self-report allows the social planner to save on enforcement costs and reduce harm through early detection. On the other hand, fine reductions may also reduce deterrence: offenders anticipate that if their detection probability turns out to be higher than initially expected, they can exploit

We present a model of the interaction between firms agreeing on a degree of collusion and a competition authority that simultaneously determines the allocation of resources to enforcement of anti-trust legislation. An increase in demand is associated with tougher enforcement and a lower degree of collusion. A stronger competitive pressure first decreases the degree of collusion and increases the level

Federal and state law enforcement interceptions of communications, as authorized by the Electronic Communications Privacy Act and analogous state laws, are contingent on obtaining a court order. We investigate how wiretap orders have been utilized in narcotics cases across the federal and state court systems. We characterize a sorting mechanism that is consistent with our data and empirical findings

A 2003 police organization reform in South Korea led to the consolidation of many local police boxes into fewer but larger patrol stations. The expectation was that such consolidation would allow police to utilize its limited resources in a more flexible and efficient way. In this study, we investigate the impact of this reform on crime by exploiting the variation in the extent of police box consolidation

We investigate how the lockdown enforcement by French authorities is associated with the resolution of corporate insolvency. In this sense, we make a distinction between four legal procedures, namely the amicable liquidation (out-of-court exit), the judicial liquidation (court-driven exit), the restructuring procedure available to non-defaulted firms, and the restructuring procedure available to defaulted

With surges in U.S. corporate political spending following the Supreme Court’s decision on Citizens United v. FEC, this paper studies the transparency of corporate political spending. We argue that shareholder engagements aimed at improving such transparency are more successful than previously documented in the literature. Some “voluntary” disclosures by firms are the result of settled engagements

We develop screening models of final offer arbitration (FOA) in which the uninformed party makes a demand to the informed party. We consider models in which settlement occurs before and after the submission of binding offers, and in each we analyze costly discovery. Our results are compared to conventional arbitration (CA) which may be viewed as a litigation model. Overall, the incentive to invoke

We model a market for professional services such as those offered by lawyers, auditors or conveyancers. Initially the market is served by a single profession with a self-regulatory organization that sets the quality standard for all the members of the profession. We then introduce a second competing profession (e.g. solicitors vs. licensed conveyancers in England) and compare the market outcomes. It

We study how entrepreneurs’ attitudes toward risk, as measured by their personal legal infractions, are related to information asymmetry and agency problems prior to bankruptcy, using a sample of 260 small Swedish firms. We find that auditor resignations are more likely in firms where entrepreneurs have legal infractions. Furthermore, we find that legal infractions are negatively related to the likelihood

We consider a simple model of litigation contests in which each party dedicates both “case-advancing” efforts that directly increase her probability of winning, as well as “adversarial” efforts, which harm her opponent’s strategy and decrease his likelihood of prevailing. Our model characterizes adversarial litigation efforts and the equilibrium investment in such efforts by both parties, subject to

What is the subjective value of voting rights? This article presents an empirical demonstration of people’s loss aversion for the value of voting rights. By way of vignette experiments using scenarios of the 2020 U.S. presidential election (Studies 1 and 2, with U.S. citizens) and a fictitious direct premier election in Japan (Study 3, with Japanese citizens), the present research measured the willingness-to-accept

Sander (2019) attempts to revive the claim that “mismatch” between the credentials of students that receive racial preferences in law school admissions and the average observable academic credentials of their peers leads to fewer black lawyers. This article examines Sander’s study and explains the reasons why second-choice analyses, and Bar Passage Study data in particular, are poor sources for causal

Discriminatory practices on the part of correctional authorities have long been subjected to public and scientific scrutiny. This paper explores whether the correctional authorities in Washington State targeted certain demographic or other groups of offenders more than others in the process of making risk assessment decisions. Using a statewide sample of adult offenders and a set of controlled and

This paper explores how reciprocity concerns of potential accident victims influence potential injurers’ precautions before an accident and victims’ settlement behavior after an accident. In our framework, a strictly liable injurer privately informed about the probability of losing in trial chooses either high or low care and, in the event of an accident, the victim demands a settlement amount from

In this paper, we study the effect of competition on the plural dimensions of hospital quality in a market with regulated prices. Our results are obtained with the standard model of hospital competition where a distinction can now be made between two different dimensions of quality while using fair general demand and cost structure. In our setting, hospitals can choose to invest either in the quality

We consider a government’s interrelated decisions of enacting laws prohibiting harmful behavior and choosing how aggressively to enforce those laws. There are three broad policies available to the government in this regard: not prohibiting the act at all, enacting a law and enforcing it, and enacting a law and not enforcing it. When enactment is costly and a fraction of the population reflexively complies

Recent literature has analyzed three main channels regarding the effect of international trade on legal institutions: overall openness to trade, a specialization on institutionally intensive exports, and a dependence on exports of natural resources. Unlike previous literature, we examine all these channels within a single regression framework. Importantly, we develop a new measure of institutional

This paper examines the credibility of threats to punish criminal offenders. The motivation is the sequential nature of crime and punishment, which unfolds as follows: enforcers threaten punishment, offenders commit crimes (or are deterred), and enforcers (possibly comprising different decision makers) enact punishments. The cost of carrying out threatened punishments after the fact is what potentially

Under the but-for requirement of causation, a tort injurer cannot be held liable for more than the difference between the loss the victim would have suffered if the injurer had not been negligent, and the loss that is in reality suffered. We ask whether this causation requirement yields efficient precaution in the context of two or more injurers. Contrary to a widely accepted view, we find that but-for

Implementation of the EU Directive on Insurance Mediation (2002/92/EG) created the first professional licensing requirements for insurance agents in Germany. This study uses data on property-liability insurance policies from a German insurer encompassing the years just before and just after the Directive, to provide evidence of the impact of licensing on insurance intermediation quality. Because many

This research offers an easy-to-implement forecast combination procedure to deal with issues of model uncertainty when evaluating cartel damages. We combine the Mallows model averaging (MMA) method with both the dummy variable (DV) and forecasting approaches to investigate the famous citric acid cartel case during the 1990s. The path of but-for prices generated from the MMA method with DV specification

Debt is analyzed in relation to the conflict between three parties, a controlling shareholder, outside investors and creditors. We follow Jensen and Meckling’s (1976) and Myers’ (1977) intuitions that leverage may result in excess value appropriation by creditors while at the same time acting to discipline private benefits appropriation. Creditors’ holdup refers to the appropriation by the incumbent

In this paper, we compare liability rules in a world where human-driven and fully-autonomous cars coexist. We develop a model where a manufacturer can invest to improve the safety of autonomous cars. Human drivers may decide to purchase a fully-autonomous car to save precaution costs to avoid road accidents and shift liability to the car manufacturer. As compared to the negligence rule, a strict liability

IRT models are among the most commonly used latent trait models in all of political science, particularly in the estimation of ideal points of political actors in institutions. While widely used, IRT models are often misapplied, and a key element of their estimation, the item parameters, are almost always ignored and discarded. In this paper, we look into the application of IRT models to the estimation

We propose an original application of screening methods using machine learning to detect collusive groups of firms in procurement auctions. As a methodical innovation, we calculate coalition-based screens by forming coalitions of bidders in tenders to flag bid-rigging cartels. Using Swiss, Japanese and Italian procurement data, we investigate the effectiveness of our method in different countries and

The repeal of the Prohibition Act in 1933 introduced state-level regulations on the retail availability of alcoholic beverages. Recently there has been much debate among industry stakeholders on how changes to these laws will affect consumer choices. We develop an index to measure purchase diversity for alcoholic beverages that considers similarities in product attributes. Following a set of households

Fixed-term labour contracts (FTCs) may be an important tool to promote employment, particularly in recessions and when dismissal costs of open-ended contracts are high. In this case, making FTCs more flexible during downturns may be useful. We assess this idea by examining the effects of a law that increased the maximum duration of FTCs in Portugal during the 2012 recession. Our analysis is based on

This paper provides novel evidence on the role of labor unions in firms’ corporate cash policy. Examining the unionization rates of firms across 29 countries for the period 2004–2015, we show that firms respond to an increase in unionization rate by decreasing their corporate cash holdings. The reported effect is symmetric, in that firms respond to increases (decreases) in unionization rate by decreasing

This paper attempts to quantify the response of different types of appellate judges to a major shift in criminal jurisprudence on drug offenses in Brazil, which, in 2010, revoked the prohibition of conversion of prison sentences in drug offenses. Appellate judges may react to criminal reform by changing their rates of judgements that are favorable to defendants and, depending on the judge type, responses

Rules governing monetary state financing vary across jurisdictions. The mainstream rationale for bans of state financing rests on the empirical assumption that monetary financing undermines fiscal discipline. We address the plausibility of this assumption by estimating local projection models for a panel of euro area countries to explore the reaction of the sovereigns’ fiscal position to a monetary

A redemption option granted to junior creditors has been advocated to accelerate Chapter 11 negotiations and rebalance junior recovery with respect to senior claims. We develop a game-theoretic, continuous-time model of the leveraged firm under Chapter 11 to assess the wealth transfers and welfare impacts of such an amendment to the bankruptcy procedure. After fitting the model to Chapter 11 current

In the U.S. tort recoveries of personal injury victims are now fully subject to subrogation claims by public and private health insurers who have previously covered the victim's health care expenses. We use an extensive-form game to model decisions that must be made by insurers when their insured party has been injured and sues for damages. If the insurer decides to join the lawsuit, it must decide

Does giving taxpayers a voice over the destination of tax revenues lead to more honest income declarations? Previous experiments have shown that giving participants the opportunity to select the organization that receives their tax funds tends to increase tax compliance. The aim of this paper is to assess whether this increase in compliance is induced by the sole fact of giving subjects a choice—a

This article models the interaction of key factors missed in most accounts of Supreme Court decision making -- that is, the interaction of the rules of authorship (chief and senior justice authorship rights), authorship utility (in terms of justice reputation, and the chief justice’s legacy), and the constraint of legal doctrines. We model how (1) the chief justices and senior median justices compete

This paper examines the relationship of respect for foreign intellectual property (IP) and domestic innovation. In a global economy, countries may choose to protect the IP of their own citizens, foreigners, or both or neither. We develop a model that shows that countries will have higher levels of innovation when respecting both domestic and foreign intellectual property. We test this prediction and

Central banks play an important role in the economy. They are responsible for the conduct of monetary policy, and in several countries, they get involved in the supervision of the financial sector. We derive a simple theoretical model to illustrate how culture may influence a politician's choice of regulatory architecture and the assignment of responsibilities when anticipating the impact of that regime

In a recent article, Epstein and Posner (2016) make an important distinction between ideological alignment and personal loyalty to the appointer. We use constitutional adjudication at the Spanish Constitutional Court to test for this distinction. We consider all constitutional review decisions in cases initiated by explicit political actors (recursos de constitucionalidad) from 1980 to 2018 (removal

In the recent period, more and more voices have called for unconventional competition policies as a way to achieve higher environmental investments from firms. This paper shows that this objective may come into conflict with those of environmental liability laws. We introduce a basic oligopoly model where firms produce a joint and indivisible environmental harm as a by-product of their output. We first

We provide empirical insight into the consequences of the Covid19 pandemic for the administration of justice. Drawing on a comprehensive monthly panel of Brazilian labor courts and using a difference-in-difference approach, we show that the pandemic has had a large and persistent deleterious effect on adjudicatory efficacy, leading to a massive decrease in the clearance rate and an increase in court

This work provides a descriptive assessment of regulated occupations in Italy and examines the impact of regulation on the labour market over the past fifteen years. First, we construct, on the basis of the applicable legal provisions, a set of novel indicators measuring whether and to what extent each occupation is regulated. We then provide a long-run descriptive assessment of the extent of regulated

This study explores the link between the individual profiles of French commercial judges and the bankruptcy cases they supervised between 2006 and 2012. A “Curriculum Vitae effect” prevails: the chance to reorganize after filing for bankruptcy varies with the composition of the chambers. We also confirm the existence of a limited (but not marginal) appointment bias, suggesting that bankruptcy cases

Based on a trade-off model of capital structure with immediate liquidation, and infinite debt maturity, we analyze the impact of prior-to-acquisition leverage levels on the optimal payment method used in an acquisition. Consistent with existing empirical studies, our model optimally yields three payment methods: Full cash, full equity, and a mix of cash and equity. The optimal level of cash in the

This paper analyzes how judicially-determined liability assignments affect valuations and prices. On two occasions in 2007, a railway company caused a fire to break out in the State of Washington. The two fires burned down some of the neighboring properties’ timber. These two incidents led to two companion court cases that made it all the way to the Washington Supreme Court. The court rulings, both

With the procedural tools of discovery and disclosure available, why would a plaintiff and a defendant fail to both understand the merits of the case and settle it out of court? I analyze a model in which initially the defendant has complete information about the case whereas the plaintiff knows nothing but can learn any fraction of the information, at no cost to himself, through discovery, after which

This paper provides a law enforcement framework through which to consider principal-agent relations among citizens, an elected official, and a law enforcer. This paper investigates how citizens’ interests are reflected in political competitions in terms of the use of financial incentives, e.g., the allocation of fine revenues, to control the intrinsically motivated law enforcer. This paper points out

This paper studies markets plagued with asymmetric information on the quality of traded goods. In Akerlof's setting, sellers are better informed than buyers. In contrast, we examine cases where buyers are better informed than sellers. This creates an inverse adverse selection problem: the market tends to disappear from the bottom rather than from the top. In contrast to the traditional model, it is

Concerns over arbitrator impartiality and independence in ICSID arbitration have led to reform proposals geared towards a multilateral investment court. Due to the ad hoc nature of appointments, it has been suggested that arbitrators may strategically render decisions in biased ways with the goal of encouraging reappointments. Although criticism against arbitrator bias has attracted significant attention

In real life situations, potential offenders may only have a vague idea of their own probability of getting caught and possibly, convicted. As they have beliefs regarding this probability, they may exhibit optimism or pessimism. Thus there exists a discrepancy between the objective expected fine and the subjective expected fine. In this context, we investigate how the fact that the choice whether or

The Covid-19 crisis has recently rekindled discussions about debt relief, leading official lenders to grant a moratorium on low-income countries’ external public debt service. Private creditors, which had massively invested in LICs (especially in Africa), have been so far relatively spared. But would they keep lending to these countries if a new wave of debt write-offs were to occur? Building on the

For many years, most scholars have assumed that the strength of reputational incentives is positively correlated with firm size. Firms that sell more products or services were thought more likely to be trustworthy than those that sell less because larger firms have more to lose if consumers decide they have behaved badly. That assumption has been called into question by recent work that shows that

This study examines the impact of staggered boards, poison pills and unequal voting rights on corporate innovation intensity using a sample of listed firms in six Asian countries from 2010 to 2017. We analyze the differential effects of antitakeover provisions using the high order fixed effects panel data model that controls for firm fixed effects, industry-year fixed effects and country-year fixed

Expungement mechanisms allow first-time offenders to seal their criminal record. Theory predicts that the stigma of a criminal record can hinder the reintegration of criminals for whom legal activities are less lucrative. In theory, expungements priced at the reservation level can facilitate the reintegration of criminals without making first-time crime more attractive. This paper considers a behavioral

The deterrence effect of police on crime has been well established using modern quasi-experimental micro-econometric methods. Although the results from these studies uniformly suggest that police spending is cost justified, it is worth exploring whether police-like alternatives can deter crime even more cheaply. Unarmed private security personnel that conspicuously patrol a neighborhood have the potential

Despite a growing consensus that host country institutions affect the spatial distribution of foreign direct investment, there is a debate about which institutions drive this relationship. This study contributes to this debate by examining the relationship between foreign direct investment net inflows and three judicial institutions of property rights protection: judicial contract enforcement, judicial

We replicate two treatments of an experimental theory test (Fehr et al., 2011) studying Hart and Moore (2008)’s idea that contracts serve as reference points in trading relationships. In contrast to rigid contracts, flexible contract terms may be perceived in a self-serving manner and, therefore, the contract parties might form subjective entitlements. This reference-dependent perception of flexible

A 2006 U.S. Supreme Court decision encouraged district courts to rely more on license fees and less on injunctions as a remedy for patent infringement. This paper provides a simple model in which a patent-owning "patent assertion entity" (PAE) and an infringing firm engage in Nash bargaining over a possible license fee after the PAE initiates an infringement lawsuit. We compare a fee-based regime in

In 1989, Barry Harris & Joseph Simons developed a quantitative method to implement the Horizontal Merger Guidelines’ hypothetical monopolist test with a market-level “critical loss” analysis. The appeal of Harris & Simons’ framework is that it created a simple, intuitive approach to delineating markets—with relatively parsimonious data requirements. After over a decade of use, however, economists began