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Full-Text Articles in Law
Peltzman Revisited: Quantifying 21st- Century Opportunity Costs Of Food And Drug Administration Regulation, Casey B. Mulligan
Peltzman Revisited: Quantifying 21st- Century Opportunity Costs Of Food And Drug Administration Regulation, Casey B. Mulligan
Journal of Law and Economics
Peltzman’s work is revisited in light of two recent opportunities to quantitatively assess trade-offs in drug regulation. First, reduced regulatory barriers to drug manufacturing associated with the 2017 reauthorization of generic-drug user fee amendments were followed by more entry and lower prices for prescription drugs. A simple, versatile industry model and historical data on entry indicate that easing restrictions on generics discourages innovation, but this cost is more than offset by benefits from enhanced competition, especially after 2016. Second, accelerated vaccine approval in 2020 had unprecedented net benefits as it improved health and changed the trajectory of the wider economy. …
A Retrospective Analysis Of The At&T/Time Warner Merger, Dennis W. Carlton, Georgi V. Giozov, Mark A. Israel, Allan L. Shampine
A Retrospective Analysis Of The At&T/Time Warner Merger, Dennis W. Carlton, Georgi V. Giozov, Mark A. Israel, Allan L. Shampine
Journal of Law and Economics
This article provides a retrospective of a litigated vertical merger: the 2018 AT&T/Time Warner merger, which was challenged by the US Department of Justice, litigated, and permitted to proceed by the court. We describe and evaluate in detail the economic model used by the government’s expert and then focus our empirical work on the accuracy of the predictions made by that model. We also discuss evidence related to the Comcast/NBC Universal merger, which involved the same theory of harm and was allowed to proceed with a remedy similar to the contractual commitment that AT&T/Time Warner unilaterally adopted. We conclude that …
Does Amazon Exercise Its Market Power? Evidence From Toys“R”Us, Leshui He, Imke Reimers, Benjamin R. Schiller
Does Amazon Exercise Its Market Power? Evidence From Toys“R”Us, Leshui He, Imke Reimers, Benjamin R. Schiller
Journal of Law and Economics
Since its founding, Amazon has established a reputation for being consumer friendly by consistently offering lower prices than its market position would seem to allow. However, recent antitrust concerns about dominant online platforms have revived questions about whether Amazon’s growing market share threatens consumer welfare. Given its reputation, regulators have proposed a new focus on conduct unrelated to prices. We ask whether such a move is premature. Using the sudden and unanticipated US exit of Toys“R”Us as a natural experiment, we find that Amazon’s toy prices on its US site increased by almost 5 percent in the wake of the …
Creditors’ Rights, Threat Of Liquidation, And The Labor And Capital Choices Of Firms, Shashwat Alok, Ritam Chaurey, Vasudha Nukala
Creditors’ Rights, Threat Of Liquidation, And The Labor And Capital Choices Of Firms, Shashwat Alok, Ritam Chaurey, Vasudha Nukala
Journal of Law and Economics
In 2002, India introduced a legal reform that allowed secured creditors to seize and liquidate a defaulter’s assets, thereby strengthening creditors’ rights. We study the impact of the legal change on firms’ real decisions regarding their capital and labor, exploiting variation in their prepolicy proportion of collateralizable assets. We find that firms increased employment and reduced their capital investments. These effects are especially strong for firms in regions with less-efficient courts. Our results are consistent with an increased threat of liquidation for firms following the passage of the law.
The Development Of The Takeover Auction Process: The Evolution Of Property Rights In The Modern Wild West, William O. Brown, Jr, Tingting Liu, J. Harold Mulherin
The Development Of The Takeover Auction Process: The Evolution Of Property Rights In The Modern Wild West, William O. Brown, Jr, Tingting Liu, J. Harold Mulherin
Journal of Law and Economics
Using a unique, hand-collected sample of US acquisitions, we study the interaction between the legal system and the takeover auction process from 1981 to 2020. We associate the strengthening of the property rights of targets’ boards after the 1989 Time Inc. decision with fundamental changes in the takeover auction process. This strengthening of the boards’ property rights has moved the auction process from a public one to a behind-the-scenes one in which targets’ boards control both the number of bidders and the flow of information. Targets’ boards are more likely to initiate the auction themselves, and the length of the …
Do Prostitution Laws Affect Rape Rates? Evidence From Europe, Huasheng Gao, Vanya Petrova
Do Prostitution Laws Affect Rape Rates? Evidence From Europe, Huasheng Gao, Vanya Petrova
Journal of Law and Economics
We identify a causal effect of the liberalization and prohibition of commercial sex on rape rates, using staggered legislative changes in European countries. Liberalizing prostitution leads to a significant decrease in rape rates, while prohibiting it leads to a significant increase. The results are stronger when rape is less severely underreported and when it is more difficult for men to obtain sex via marriage or partnership. We also provide the first evidence for the asymmetric effect of prostitution regulation on rape rates: the magnitude of prostitution prohibition is much larger than that of prostitution liberalization. Placebo tests show that prostitution …
Why Did Firms Practice Segregation? Evidence From Movie Theaters During Jim Crow, Ricard Gil, Justin Marion
Why Did Firms Practice Segregation? Evidence From Movie Theaters During Jim Crow, Ricard Gil, Justin Marion
Journal of Law and Economics
Racial segregation by businesses during Jim Crow was often voluntary and practiced without a legal mandate. Voluntary segregation can be driven by profit-motivated business owners catering to racist white customers or discrimination by business owners. We assess the relative importance of customers’ and firms’ discrimination by examining the 1953 desegregation of Washington, DC, movie theaters, which occurred rapidly because of a Supreme Court ruling affecting only businesses in Washington. Using weekly data for a nationwide sample of theaters, we find that revenues of Washington theaters fell relative to other theaters, consistent with reduced demand from biased white customers. We use …
Crime And (A Preference For) Punishment: The Effects Of Drug Policy Reform On Policing Activity, Adam Soliman
Crime And (A Preference For) Punishment: The Effects Of Drug Policy Reform On Policing Activity, Adam Soliman
Journal of Law and Economics
Researchers still know very little about the incentives of police. Using geocoded crime data and a novel source of within-city variation in punishment severity, I shed light on enforcement behavior. I find a 13 percent decrease in drug arrests in parts of a city where drug sale penalties were weakened. There is no displacement of nondrug offenses. If offenders are significantly deterred by harsher penalties, as the law intended and Becker’s model of criminal behavior predicts, drug arrests should increase in areas with weaker penalties. My results are therefore consistent with police officers treating enforcement effort and punishment severity as …
Pride And Prejudice: Same-Sex Marriage Legalization Announcements And Hate Crimes, Robert W. Pettis, Zehra Valencia, Breyon J. Williams
Pride And Prejudice: Same-Sex Marriage Legalization Announcements And Hate Crimes, Robert W. Pettis, Zehra Valencia, Breyon J. Williams
Journal of Law and Economics
In this paper, we examine whether same-sex marriage legalization announcements impact the occurrence of hate crimes against lesbian, gay, bisexual, and transgender (LGBT) people. Using a difference-in-differences design, we exploit the variation in the timing of same-sex marriage legalization announcements across states. On average, a same-sex marriage legalization announcement reduces the anti-LGBT hate crime rate by .112 per 100,000 people, although some additional analyses have weaker results. Decreases are mostly driven by reductions in violent crimes. Event-study estimates show that results fade after 1 year and provide evidence that reductions are not due to changes in social trends before an …
Public Opinion About Regulation, Sam Peltzman
Public Opinion About Regulation, Sam Peltzman
Journal of Law and Economics
The paper describes how ordinary citizens view economic regulation and summarizes answers to questions about regulation and regulators since the 1970s from the General Social Survey. The pattern is clear: ordinary citizens are skeptical and wary. They want less regulation and do not trust regulators to do what is right. The mistrust has become stronger over time. However, the public supports environmental and electricity rate regulation. These sentiments are shared across age, sex, race, education, and income groups and the left/right ideological spectrum. The public tends to oppose less traditional regulation, such as wage and price controls, government ownership of …
The Returns To Medical Inventions, David Dranove, Craig Garthwaite, Bingxiao Wu
The Returns To Medical Inventions, David Dranove, Craig Garthwaite, Bingxiao Wu
Journal of Law and Economics
Medical innovation is perhaps the most important driver of health care spending and quality. Economists have studied pharmaceutical innovation for decades, and their findings have contributed to the debate about optimal Food and Drug Administration policy. Despite their importance to health care spending and value, there is no similar literature to inform an optimal regulation system for novel and valuable medical procedures. In this paper, we begin to fill this gap by documenting the incentives for developing medical procedures and the process through which they are approved for use. Drawing on the work of Sam Peltzman and George Stigler, we …
Advertising Costs And Product Prices, Hal Varian
Advertising Costs And Product Prices, Hal Varian
Journal of Law and Economics
How does a change in the cost of advertising affect product prices? On the one hand, advertising increases costs, but on the other hand, advertising is expected to generate more sales, so the impact on product prices and profits depends on the magnitude of these two effects. In this article I describe some recent trends in online and offline advertising and build a simple model of an online merchant. In this model when advertising becomes more costly, the merchant cuts back on ad spending, but it does not necessarily change product prices.
Does Uber Benefit Travelers By Price Discrimination?, Yenjae Chang, Clifford Winston, Jia Yan
Does Uber Benefit Travelers By Price Discrimination?, Yenjae Chang, Clifford Winston, Jia Yan
Journal of Law and Economics
We use Uber fare data for passenger trips from Los Angeles, New York, and San Francisco airports to hotels in those metropolitan areas to test whether Uber engages in third-degree price discrimination by charging higher fares to travelers who originate from the same airports as other travelers but who stay at more expensive hotels. We find that fares are positively and statistically significantly related to the price of hotel rooms. Importantly, we also find that allowing ride-sharing companies to price discriminate improves travelers’ welfare, on average, by increasing their travel options.
In The Beginning: The Creation Of The Economic Expert In Antitrust, Kenneth G. Elzinga
In The Beginning: The Creation Of The Economic Expert In Antitrust, Kenneth G. Elzinga
Journal of Law and Economics
Today one cannot imagine antitrust litigation without the use of economic experts. Defendants and plaintiffs alike pay handsomely for their reports and testimony. However, the use of economists as expert witnesses did not begin until the iconic case of United States v. United States Steel, when two prominent economists, Francis Walker and Jeremiah Jenks, testified on behalf of the Department of Justice and United States Steel. Drawing on the original trial transcript, this paper assesses their role in the litigation. While their level of theoretical sophistication and empirical analysis falls short of today’s standards, the testimony of Walker and Jenks …
Antitrust In The Information Economy: Digital Platform Mergers, Robert W. Crandall, Thomas W. Hazlett
Antitrust In The Information Economy: Digital Platform Mergers, Robert W. Crandall, Thomas W. Hazlett
Journal of Law and Economics
The growth of large digital platforms has caused some observers to claim that merger policy has been too lax to protect consumer welfare, stating a predicate for antitrust policy reform. We address this by exploring the relative importance of past mergers to the current value of the five largest platforms (Google, Amazon, Facebook, Apple, and Microsoft). We find that mergers have not been as important to these platforms’ size compared with other large technology companies. Even so, it could be argued that the mergers engaged in by these platforms have harmed efficiency. Listing the combinations often used to advance this …