Copyright (c) 2009 Berkeley Electronic Press All rights reserved. http://www.bepress.com/rle Recent documents in Review of Law & Economics en-us Tue, 17 Nov 2009 23:22:22 PST 3600 http://www.bepress.com/rle/vol5/iss1/art29 http://www.bepress.com/rle/vol5/iss1/art29 Mon, 16 Nov 2009 15:43:53 PST This paper examines the decision faced by a plaintiff who has successfully established liability, but the judge has reduced the jury's award under a procedure known as a remittitur. The plaintiff has the choice of accepting the remittitur or having a new trial. An analysis of the rules surrounding remittiturs in US federal court shows that there is almost no advantage to choosing a new trial rather than to accept the remittitur, no matter how small the resulting award may be. Joseph B. Kadane http://www.bepress.com/rle/vol5/iss1/art28 http://www.bepress.com/rle/vol5/iss1/art28 Mon, 16 Nov 2009 03:46:01 PST Journalists sued for defamation may refuse to reveal their anonymous sources. To escape liability under the traditional English rule, they then need to show proof that the news is correct. By contrast, many US states have switched the burden of proof such that plaintiffs must first present evidence that the news is false. Focusing on the incentives of sources to leak, we find that the American rule reduces the frequency of type I errors (true stories are not learned by the society) at the expense of a higher frequency of type II errors (the society believes wrong stories). The American rule is superior when courts are likely to find the truth without knowing the identity of sources, and when firms can severely punish even honest sources. Furthermore, when courts rule that sources must be revealed, they should ensure a higher compliance rate of journalists under the American rule. Ido Baum K10 K41 http://www.bepress.com/rle/vol5/iss1/art27 http://www.bepress.com/rle/vol5/iss1/art27 Thu, 05 Nov 2009 01:57:48 PST Property law usually addresses encroachments with ejectment. Building encroachments differ, however, as restoring a landowner's property claims implies the reversal of often large costs sustained by the builder. The authority thus confronts the following dilemma: either it stands by the landowner, thereby facing the social costs of undoing significant investments and possibly supporting an opportunistic landowner that tries to hold up the builder, or it defends the investment of the builder thereby endorsing a kind of private eminent domain. In addressing building encroachments, national property laws have deployed different remedies ranging from a property rule in favor of the landowner to a property rule in favor of the builder with a variety of liability rules, often hybridized with property rules, in between. This paper models the builder-owner conflict after the theory of optional law (Ayres, 2005); it frames different national solutions into a common analytical setting; and it evaluates the different laws in their relative allocative and distributive outcomes and their capacity to constrain opportunistic behavior. Matteo Rizzolli K11 http://www.bepress.com/rle/vol5/iss1/art26 http://www.bepress.com/rle/vol5/iss1/art26 Mon, 02 Nov 2009 15:24:17 PST We develop a model of lawmaking to study the efficiency implications of, and variation in, jurisdictions' choices between promulgation of indigenously developed laws and legal transplants. Our framework emphasizes the sequential nature of lawmaking, the ubiquity of uncertainty, considerations about ex-ante promulgation versus ex-post adjustment costs, and the importance of the political context of legal reform. In discerning the patterns of inefficiencies in both transplantation and indigenous lawmaking, we elucidate the role of heterogeneity of interests and adaptability of a legal system. We also find that domestic corruption per se need not justify transplantation of foreign legal models. Our results support the view that local conditions are a crucial determinant of the appropriate path of institutional reform. Peter Grajzl D02 D72 K00 K40 P51 http://www.bepress.com/rle/vol5/iss1/art25 http://www.bepress.com/rle/vol5/iss1/art25 Fri, 16 Oct 2009 16:02:21 PDT A state's right to prohibit unions from compelling employees to pay dues even when they are covered by a collective bargaining agreement has its basis in the 1947 Taft-Hartley amendments to the National Labor Relations Act (1935). After the amendment's passage, twelve states passed "right-to-work" laws--as did ten more states in the intervening years. Although there has been considerable research on the effect of right-to-work laws on union density, organizing efforts, industrial development and some study of wage differences, there has been little or no examination of the legislation's influence on business and economic conditions across states. In this paper, the average differences in business conditions, employment, personal income, wages and salaries, and proprietors' income across states that have enacted right-to-work laws versus those states that did not, are examined assuming that the legislation is endogenous and controlling for state real economic growth, region, and year. Although right-to-work states may be more attractive to business, this does not necessarily translate into enhanced economic verve in the right-to-work state if there is little "trickle-down" from business owners to the non-unionized workers. While the number of self-employed is higher and business bankruptcies lower on average in right-to-work states, there is no significant difference in capital formation or employment rates, ceteris paribus. In addition, per-capita personal income and wages are both lower, yet proprietors' income is higher in right-to-work states. Lonnie K. Stevans labor economics law and economics http://www.bepress.com/rle/vol5/iss1/art24 http://www.bepress.com/rle/vol5/iss1/art24 Fri, 02 Oct 2009 15:29:01 PDT This paper shows that when a product innovation is protected by both patents and trade secrets, under U.S. law the innovator can be induced to license a rival even if patent protection is very broad and there are no partially competitive older products. This opportunity may benefit society. Nevertheless, some legal restrictions in force at the moment do not permit society to reap all potential gains. Since incentive and efficiency considerations suggest that a socially optimal contract should provide for both a negative fixed fee and post-patent royalties at the same unit level as before a patent's expiration, we conclude that per se prohibitions of these practices are unjustified. Elisabetta Ottoz K21 L13 O3 http://www.bepress.com/rle/vol5/iss1/art23 http://www.bepress.com/rle/vol5/iss1/art23 Fri, 02 Oct 2009 14:44:26 PDT We examine the time it takes to reach a verdict (deliberation time) using a unique dataset on the deliberation times of actual juries in criminal and civil cases. Duration model results indicate that case complexity, the unanimity of verdicts and the process of voir dire affect deliberation times, whereas jury size, prior juror experience and the gender composition of juries are not significant correlates. The results shed empirical light on an important correlate of trial accuracy using real-world data, in contrast to previous research that employed mock jury data. Thomas L. Brunell Law Economics Microeconometrics http://www.bepress.com/rle/vol5/iss1/art22 http://www.bepress.com/rle/vol5/iss1/art22 Fri, 02 Oct 2009 05:27:31 PDT Despite the fact that public corporations ought to be risk neutral, they often carry insurance. This note first considers why insurance (or, more precisely, the package of services provided by insurance companies) might create value, regardless of the risk preferences of managers, shareholders, or other corporate stakeholders. One motive is that their contractual counterparties--buyers, lessors, and lenders--require that they carry insurance. Three explanations for why the requirement might be value enhancing are proposed Victor P. Goldberg contracts risk management http://www.bepress.com/rle/vol5/iss1/art21 http://www.bepress.com/rle/vol5/iss1/art21 Thu, 03 Sep 2009 12:38:37 PDT The law and economics literature on multiple causation generally distinguishes between causal uncertainty and joint causation. For cases of causal uncertainty it has been shown that proportional liability, a fractional share rule, may lead to socially optimal incentives for the level of care. However, for cases of joint causation fractional share rules tend to be inefficient. This paper argues that the crucial distinction is not so much between the uncertainty or jointness of the causal elements, but rather between the additivity or non-additivity of risk factors. We develop an approach that integrates causal uncertainty and joint causation. We show that an apportionment rule that assigns liability in proportion to the probability of causation always yields efficient incentives when the risk factors are additive. In non-additive cases the proportional rule has an efficient equilibrium outcome (and this equilibrium is unique for almost all parameter settings) when tortfeasors act independently and simultaneously. But it is not always efficient when tortfeasors act in concert or act sequentially. We apply our approach to four recent cases from English jurisprudence. These cases illustrate that both causal uncertainty and joint causation may involve additive as well as non-additive risks. Ben C.J. van Velthoven Economics of Tort http://www.bepress.com/rle/vol5/iss1/art20 http://www.bepress.com/rle/vol5/iss1/art20 Thu, 03 Sep 2009 11:44:26 PDT This paper investigates crime against enterprises, using a simple modelling framework and enterprise surveys conducted in 34 countries in Europe and Asia between 2002 and 2005. The empirical results show that crime has an especially large negative impact on micro enterprises that handle large cash balances. Enterprises with worse business conduct are also more likely to be targeted by crime. The perception of crime is shown to be associated with experience of street crime on the enterprise level and experience of organized crime on the country level. The paper also highlights the deterrent effect of crime on enterprise investment decisions. Libor Krkoska Business environment investments