We investigate the effects of fee-shifting in an experimental litigation game. In our setup, a defendant may cause harm to a plaintiff. The defendant can take precautions to lower the probability of harm at a personal cost. In case of harm, the parties go to court, where the winner is determined by a rent-seeking contest. We compare two fee-shifting rules: under the American rule each party bears its

AbstractThis article presents the first empirical examination of giving to §501(c)(4) organizations, which have recently become important players in U.S. politics. Unlike gifts to charity, donations to a 501(c)(4) are not legally deductible. Yet, gifts to c(4) organizations are highly elastic to the after-tax price of charitable giving. At the lower end of the observed tax price range, c(4) giving

AbstractDonohue and Levitt (2001) presented evidence that the legalization of abortion in the early 1970s played an important role in the crime drop of the 1990s. That paper concluded with a strong out-of-sample prediction regarding the next two decades: “When a steady state is reached roughly twenty years from now, the impact of abortion will be roughly twice as great as the impact felt so far. Our

AbstractTo improve their fiscal position, Medicare and some state Medicaid programs have recently taken steps to mandate reporting of personal injury awards and thus facilitate subrogation against such awards. Participants in the tort system have argued these additional reporting requirements might delay settlement of claims, harming both plaintiffs and defendants. This article examines this problem

AbstractConventional wisdom in the economic analysis of tort law holds that legal errors distort incentives, causing behavior to depart from the optimum. If potential injurers know that courts err, they may engage in less or more than optimal precaution. This article revisits the effect of judicial error on the incentives of potential injurers by identifying a heretofore-neglected filtering effect

AbstractTaste-based discrimination (i.e. discrimination due to racist preferences) receives more attention than statistical discrimination in the enforcement literature, because the latter allows enforcers to increase their “success rates.” I show here that when enforcers’ incentives can be altered via liabilities and rewards, all types of discrimination reduce deterrence. Moreover, adverse effects

AbstractWe investigate the role that political ideology plays in the selection process for articles in law reviews. To do so, we match data on the political ideology of student editors from 15 top law reviews from 1990 to 2005 to data on the political ideology of the authors of accepted articles. We find that law reviews with a higher share of conservative editors accept a higher share of articles

AbstractThe Foreign Corrupt Practices Act (FCPA) prohibits U.S.-related firms from making bribes abroad. We analyze the FCPA’s effects in a model of competition between a U.S. and foreign firm for contracts in a host country. If the FCPA only applies to the U.S. firm, it reduces that firm’s competitiveness and either increases bribery by the foreign firm or reduces overall investment. If the FCPA also

AbstractThere is growing evidence that childbirth can have especially adverse effects on the career advancement of women. Our study examines how this affects the fertility decisions of men and women on the partner track. We use the After the JD study, a rich panel data set on a nationally representative sample of lawyers, and find that women are more likely than men to delay their first child until

AbstractLaw-and-economics has an ex-middle problem. First, there is the problem of preserving law’s deterrent power, and its ability to influence later behavior, even when it is sensible to renegotiate incentives later on. The issue is hardly limited to contract renegotiation, and the ubiquity of this kind of ex-middle thinking is examined here. Second, there is the idea that the more our thinking

AbstractIn recent years, numerous observers have raised concerns about “policing for profit,” or the deployment of law enforcement resources to raise revenue rather than to provide public safety. However, identifying the causal effects of fiscal incentives on law enforcement behavior has remained elusive. In a regression discontinuity design implemented on traffic citation and accident data from Saskatchewan

AbstractThis article analyzes the workings of liability when harm-inflicting consumers are present biased and both product safety and consumer care influence expected harm. We show that present bias introduces a rationale for shifting some losses onto the manufacturer, in stark contrast with the baseline scenario in which strict consumer liability induces socially optimal product safety and precaution

AbstractUnlike the cash-bail regimes that are prevalent in state courts, federal courts rarely use money bail as a condition of pretrial release. Nonetheless, this article presents evidence that pretrial release influences case outcomes for federal defendants. Using case data spanning 71 federal district courts, the article suggests that pretrial release reduces a defendant’s sentence and increases

With irreversible investments in safety, changes in workers’ compensation laws should affect employer incentives asymmetrically: increases in workers’ compensation generosity should cause employers to invest more in safety, but comparable decreases might not cause them to disinvest in existing precautionary programs or equipment. Although maximum weekly benefits caps have been fairly stable, state

This article offers an analysis of negligence law in an environment with asymmetric information and costly signaling. We consider three possible variations of the negligence doctrine, based on its two elements—the standard of care and damages. We find that accounting for signaling costs affects the social desirability of the negligence rule. In a nontrivial number of cases, the social costs are lowest

This article deals with the control of hazardous activities in situations where potential victims can affect their exposure to risk. Economists have generally considered ex ante regulation (safety standards) to be a substitute for ex post policies (exposure to tort liability) in order to control externalities. We show that when the victim’s compensation is partial (e.g., due to death or serious bodily

While civil law courts of last resort—e.g., cassation courts in France, Italy, and Chile—review up to 90% of appealed cases, common law courts of last resort—e.g., supreme courts of the United States, United Kingdom, and Canada—hear as few as 1% of the same petitions. In this study, we postulate that these different policies can be explained by a comparatively larger commitment from common law courts

Tightening corrections budgets, the lack of a legal right to in-person prison visitation, and the increasing availability of video visitation have led many prison and jail administrators to consider limiting opportunities for in-person visitation. This is concerning given the large literature which argues inmates receiving in-person visits are less likely to recidivate upon release. On the other hand

This study investigates the optimal nature of law making under uncertainty. I focus on a case in which a harmful activity will be subjected to some regulatory measures (a standard, exposure to liability, or a corrective tax). The bene fits and costs of precaution are ex-ante uncertain, and this places a risk burden on both injurers and victims. The optimal policy should, at the same time, strike a

How much do market participants in different industries value a marginal change in patent term (i.e., duration of patent protection)? We explore this research question by measuring the behavioral response of patentees to a rare natural experiment: a change in patent term rules, due to passage of the TRIPS agreement. We find significant heterogeneity in patentee behavior across industries, some of which

Contracts commit individuals to a future course of action and create feelings of entitlement on the parties. In a contractual gap, parties’ duties and rights are not univocal, and while promisors will often feel entitled to breach, promisees will feel entitled to receive the promised performance. This divergence leads to disputes, aggrievement, and retaliatory behavior whenever one of the parties feels

This paper analyzes a contest in which defenders move first, have private information about the value of the objects they are trying to protect, and determine the observability of their defense efforts. The equilibrium consistent with the intuitive criterion depends on the distribution of defender types, the magnitude of the difference between defender types, and the asymmetry between defender and

This article explores the selection of disputes for litigation in a setting with two-sided incomplete information and correlated signals. The models analyzed here suggest that Priest and Klein’s conclusion that close cases are more likely to go to trial than extreme cases remains largely valid when their model is interpreted as involving correlated, two-sided incomplete information and is updated (i)

Of the estimated 11.1 million undocumented immigrants in the United States, 1.1 million are children. Due to differential treatment in the labor market, teenage undocumented immigrants face low returns to schooling. To measure the effect of legal status on the educational choices of Hispanic teenagers, we compare siblings who differ in their legal status due to their birth country. We find that teenagers

Despite the vast sums transferred through the legal system, the foundations of the procedures used to compensate plaintiffs for unobservable losses remain unclear. Standard remedies can compensate plaintiffs for unknown harms, but it is expensive to do so. Damage awards will generally undercompensate or overcompensate a plaintiff whose true harm is unknown, while equitable remedies that provide more

For helpful comments and input, the authors thank David Abrams, Alma Cohen, Allan Ferrel, Michael Frakes, Mark Lemley, Jonathan Masur, Michael Meurer, Michael Risch, Pam Samuelson, David Schwartz, Ted Sichelman, Charles Silver, Matthew Spitzer, Melissa Wasserman, Heidi Williams, prior anonymous reviewers, and participants in the 2012 Empirical Patent Law Conference sponsored by Cornell Law School and

The putative existence of race-based discrimination in mortgage pricing is both a scholarly and societal concern. Efforts to assess discrimination empirically, however, are typically plagued by omitted variables, which leave any evidence of discrimination open to interpretation. We take a two-pronged approach to the problem. First, we analyze a dataset comprising discretionary mortgage fees collected

Punishment severity and crime rates vary across jurisdictions. Some countries have punitive sanctions and nevertheless experience relatively high crime rates. This article explores potential sources of the interjurisdictional heterogeneity in the optimal law enforcement model, paying particular attention to the possibility that the high crime despite high sanctions outcome can be socially optimal.

We collect data on the record of every action in over one thousand cases involving public companies from 2004 to 2011 in the Delaware Court of Chancery, which is the leading court for corporate law disputes in the United States. We use these data to estimate how markets respond to Delaware litigation events and characteristics such as case initiations, procedural motions, case quality, and judge identity

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 if, the safest prevention measures are also the most reliable ones

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 disgorgement a problem arises that is the

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

Between 1976 and 1999, twelve states passed laws requiring that lists of eligible jurors for state trials be created by selecting at random from publicly available sources, limiting the discretion of jury commissioners to exclude African Americans from jury service. A difference-in-difference analysis suggests these reforms led to a 5–6 percentage point drop in the share of new admissions to prison

This article considers the social desirability of prison work programs in a model in which the function of imprisonment is to deter crime. Two types of prison work programs are studied—voluntary ones and mandatory ones. A voluntary work program is socially beneficial: if prisoners are paid a wage that just compensates them for their disutility from work, the deterrent effect of the prison sentence

There are good reasons to believe that consumers’ behavior is sometimes influenced by systematic misperceptions of legal norms that govern product quality. Consumers might misperceive specific rules, such as those found in food safety regulations, as well as more general standards, such as the unconscionability doctrine or limitations on waivers of default substantive or procedural rights. When demand

This article formally models the virtues of Edmund Burke’s conservatism, characterizes the optimal level of conservatism, and applies the model to management, law, and policy. I begin by introducing “switcher’s curse,” a trap in which a decision maker systematically switches too often. Decision makers suffer from switcher’s curse if they forget the reason that they maintained incumbent policies in

We present a new measure of judicial ideology based on judicial hiring behavior. Specifically, we utilize the ideology of the law clerks hired by federal judges to estimate the ideology of the judges themselves. These Clerk-Based Ideology (CBI) scores complement existing measures of judicial ideology in several ways. First, CBI scores can be estimated for judges across the federal judicial hierarchy

Would you volunteer to pay a carbon tax if 99% of other Americans also volunteered to pay such a tax? Instead of traditional referenda, it is possible to structure plebiscites which would only bind a subset of the population (e.g., to be subject to a carbon tax) if that subset’s individually chosen conditions for participation are met. While provision-point mechanisms with exogenously set provision

In this article, we analyze how political competition affects the design of public law enforcement policies. The article arrives at two main conclusions (assuming that the cost of enforcement is linear, criminal’s type is uniformly distributed, and the society is wealthy enough): (1) electoral competition entails no loss of efficiency at equilibrium for both minor and major offenses (e.g., minor offenses

This study adds to the literature on how both plaintiffs' beliefs and legal precedent affect access to justice. It also studies how actual accesses to the judiciary result, in turn, in the establishment of further precedent that is able to affect the behavior of new prospective plaintiffs. The analysis is based on a micro-founded Bayesian learning model. The dynamic model shows that precedent, indeed

Alexis de Tocqueville and Robert Putnam are but two of the many admirers of the countless private associations that lie at the core of civil society. This article seeks to advance understanding of the law-like activities of these associations. Residential community associations and sports leagues, for example, make rules and levy fines on members who violate them. The New York Diamond Dealers Club

Though police strikes have been well studied, there are almost no articles written on the public safety consequences of police work slowdowns—labor actions where police officers reduce their ticket-writing and/or arrest productivity for a temporary period. This article fills the current void by presenting evidence on the 1997 New York City Police Department work slowdown, to my knowledge the longest

In order to study the political ideologies of judicial law clerks in the United States, we construct a novel dataset that combines information on the identity of clerks with a measure of political ideology based on political donations. We then use this data to empirically investigate several important questions about the ideologies of clerks. First, we examine whether clerks tend to share the liberal

Nine states adopted caps on non-economic damages during the third medical malpractice reform wave from 2002–05, joining twenty-two other states with caps on non-economic or total damages. We study the effects of these reforms on physician supply. Across a variety of difference-in-differences (DiD), triple differences, and synthetic control methods, in both state- and county-level regressions, we find

Growing evidence suggests that many people are surprisingly responsive to unconventional policy tools, such as defaults or choice-framing, yet unresponsive to conventional ones, such as taxes or subsidies. This article studies the optimal choice of policy instrument in settings characterized by such features. We utilize a simple binary-choice model in which decision-makers are either active or passive;

We explore how government officials’ behavior varies with their ethnicity, gender, and political orientation. Specifically, we analyze criminal sentencing decisions in Texas state district courts using data on approximately half a million criminal cases from 2004 to 2013. We exploit randomized case assignments within counties and obtain precisely estimated effects of judges’ ethnicity, gender, and