Other Economics Commons^™

Antitrust And Platform Monopoly, Herbert J. Hovenkamp

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Are large digital platforms that deal directly with consumers “winner take all,” or natural monopoly, firms? That question is surprisingly complex and does not produce the same answer for every platform. The closer one looks at digital platforms the less they seem to be winner-take-all. As a result, competition can be made to work in most of them. Further, antitrust enforcement, with its accommodation of firm variety, is generally superior to any form of statutory regulation that generalizes over large numbers.

Assuming that an antitrust violation is found, what should be the remedy? Breaking up large firms subject to extensive …

Corporate Law For Good People, Yuval Feldman, Adi Libson, Gideon Parchomovsky

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This article offers a novel analysis of the field of corporate governance by viewing it through the lens of behavioral ethics. It calls for both shifting the focus of corporate governance to a new set of loci of potential corporate wrongdoing and adding new tools to the corporate governance arsenal. The behavioral ethics scholarship emphasizes the large share of wrongdoing generated by "good people" whose intention is to act ethically. Their wrongdoing stems from "bounded ethicality" -- various cognitive and motivational processes that lead to biased decisions that seem legitimate. In the legal domain, corporate law provides the most fertile …

The Costs Of Critical Habitat Or Owl’S Well That Ends Well, Jonathan Klick, J.B. Ruhl

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When the Fish and Wildlife Service designated land in four counties of Arizona as “critical habitat” necessary for the protection of the endangered cactus ferruginous pygmy‐owl, property values dropped considerably. When the owl was later delisted, property values jumped back up. We use difference-in-difference and synthetic control designs to identify this effect with Zillow property value data. The results provide an estimate of the costs of this critical habitat designation, and they are considerable, contrary to the regulators’ position that critical habitat protection imposes no incremental costs beyond the original endangered species listing.

The Law And Economics Of Risk Regulation, Cary Coglianese

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Law plays a central role in the management of risk in society. The rules adopted by regulatory agencies now affect nearly every facet of the economy, and as such regulation has motivated a substantial body of academic research. Law and economics research on regulation has, first, demonstrated the normative justification for governmental intervention in the marketplace based on the concept of market failure. Second, political economy research on regulation has shown how, as a positive matter, interest groups, political movements, and public pressure affect the stringency of such regulation, sometimes more than any normative rationale for regulation. Third, risk regulation …

The Law And Economics Of Proportionality In Discovery, Jonah B. Gelbach, Bruce H. Kobayashi

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This paper analyzes the proportionality standard in discovery. Many believe the Advisory Committee's renewed emphasis on this standard has the potential to infuse litigation practice with considerably more attention to questions related to the costs and benefits of discovery. We discuss the history and rationale of proportionality's inclusion in Rule 26, adopting an analytical framework that focuses on how costs and benefits can diverge in litigation generally, and discovery in particular. Finally, we use this framework to understand the mechanics and challenges involved in deploying the six factors included in the proportionality standard. Throughout, we emphasize that the proportionality standard …

How Corporate Governance Is Made: The Case Of The Golden Leash, Matthew D. Cain, Jill E. Fisch, Sean J. Griffith, Steven Davidoff Solomon

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This Article presents a case study of a corporate governance innovation—the incentive compensation arrangement for activist-nominated director candidates colloquially known as the “golden leash.” Golden leash compensation arrangements are a potentially valuable tool for activist shareholders in election contests. In response to their use, several issuers adopted bylaw provisions banning incentive compensation arrangements. Investors, in turn, viewed director adoption of golden leash bylaws as problematic and successfully pressured issuers to repeal them.

The study demonstrates how corporate governance provisions are developed and deployed, the sequential response of issuers and investors, and the central role played by governance intermediaries—activist investors, institutional …

Mandatory Rules And Default Rules In Insurance Contracts, Tom Baker, Kyle D. Logue

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The economic analysis of contract law can be organized around two general questions: (1) what are the efficient or welfare-maximizing substantive rules of contract law; and (2) once those rules have been identified, when if ever should they be made mandatory and when should they be merely “default rules” that the parties can contract around if they wish? Much of contract theory over the past twenty years has been devoted to developing answers to those two questions. The same two questions can be posed with respect to the rules of insurance law. Although previous scholars have examined particular substantive doctrines …

Public Good Economics And Standard Essential Patents, Christopher S. Yoo

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Standard essential patents have emerged as a major focus in both the public policy and academic arenas. The primary concern is that once a patented technology has been incorporated into a standard, the standard can effectively insulate it from competition from substitute technologies. To guard against the appropriation of quasi-rents that are the product of the standard setting process rather than the innovation itself, standard setting organizations (SSOs) require patentholders to disclose their relevant intellectual property before the standard has been adopted and to commit to license those rights on terms that are fair, reasonable, and non-discriminatory (FRAND).

To date …

A Psychological Account Of Consent To Fine Print, Tess Wilkinson-Ryan

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The moral and social norms that bear on contracts of adhesion suggest a deep ambivalence. Contracts are perceived as serious moral obligations, and yet they must be taken lightly or everyday commerce would be impossible. Most people see consent to boilerplate as less meaningful than consent to negotiated terms, but they nonetheless would hold consumers strictly liable for both. This Essay aims to unpack the beliefs, preferences, assumptions, and biases that constitute our assessments of assent to boilerplate. Research suggests that misgivings about procedural defects in consumer contracting weigh heavily on judgments of contract formation, but play almost no role …

Reinventing Copyright And Patent, Abraham Bell, Gideon Parchomovsky

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Intellectual property systems all over the world are modeled on the one-size-fits-all principle. However important or unimportant, inventions and original works of authorship receive the same scope of protection, for the same period, backed by the same variety of legal remedies. Metaphorically speaking, all intellectual property is equal under the law. This equality comes at a heavy price. The equality principle gives all creators access to the same remedies, even when those remedies create perverse incentives. Moreover, society overpays for innovation by inflicting on society more monopoly losses than are strictly necessary to incentivize production.

In this Article, we propose …

Patent Value And Citations: Creative Destruction Or Strategic Disruption?, David S. Abrams, Ufuk Akcigit, Jillian Popadak

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Prior work suggests that more valuable patents are cited more and this view has become standard in the empirical innovation literature. Using an NPE-derived dataset with patent-specific revenues we find that the relationship of citations to value in fact forms an inverted-U, with fewer citations at the high end of value than in the middle. Since the value of patents is concentrated in those at the high end, this is a challenge to both the empirical literature and the intuition behind it. We attempt to explain this relationship with a simple model of innovation, allowing for both productive and strategic …

A Market For Justice: A First Empirical Look At Third Party Litigation Funding, David S. Abrams, Daniel L. Chen

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The alienability of legal claims holds the promise of increasing access to justice and fostering development of the law. While much theoretical work points to this possibility, no empirical work has investigated the claims, largely due to the rarity of trading in legal claims in modern systems of law. In this paper we take the first step toward empirically testing some of these theoretical claims using data from Australia. We find some evidence that third-party funding corresponds to an increase in litigation and court caseloads. Cases with third-party funders are more prominent than comparable ones. While third-party funding may have …

The Trouble With Basic: Price Distortion After Halliburton, Jill E. Fisch

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Many commentators credit the Supreme Court’s decision in Basic, Inc. v. Levinson, which allowed courts to presume reliance rather than requiring individualized proof, with spawning a vast industry of private securities fraud litigation. Today, the validity of Basic’s holding has come under attack as scholars have raised questions about the extent to which the capital markets are efficient. In truth, both these views are overstated. Basic’s adoption of the Fraud on the Market presumption reflected a retreat from prevailing lower court recognition that the application of a reliance requirement was inappropriate in the context of impersonal public …

Competition In Information Technologies: Standards-Essential Patents, Non-Practicing Entities And Frand Bidding, Herbert J. Hovenkamp

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Standard Setting is omnipresent in networked information technologies. Virtually every cellular phone, computer, digital camera or similar device contains technologies governed by a collaboratively developed standard. If these technologies are to perform competitively, the processes by which standards are developed and implemented must be competitive. In this case attaining competitive results requires a mixture of antitrust and non-antitrust legal tools.

FRAND refers to a firm’s ex ante commitment to make its technology available at a “fair, reasonable and nondiscriminatory royalty.” The FRAND commitment results from bidding to have one’s own technology selected as a standard. Typically the FRAND commitment is …

The Relational Contingency Of Rights, Gideon Parchomovsky, Alex Stein

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In this Article, we demonstrate, contrary to conventional wisdom, that all rights are relationally contingent. Our main thesis is that rights afford their holders meaningful protection only against challengers who face higher litigation costs than the rightholder. Contrariwise, challengers who can litigate more cheaply than a rightholder can force the rightholder to forfeit the right and thereby render the right ineffective. Consequently, in the real world, rights avail only against certain challengers but not others. This result is robust and pervasive. Furthermore, it obtains irrespectively of how rights and other legal entitlements are defined by the legislator or construed by …

Harsanyi 2.0, Matthew D. Adler

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How should we make interpersonal comparisons of well-being levels and differences? One branch of welfare economics eschews such comparisons, which are seen as impossible or unknowable; normative evaluation is based upon criteria such as Pareto or Kaldor-Hicks efficiency that require no interpersonal comparability. A different branch of welfare economics, for example optimal tax theory, uses “social welfare functions” (SWFs) to compare social states and governmental policies. Interpersonally comparable utility numbers provide the input for SWFs. But this scholarly tradition has never adequately explained the basis for these numbers.

John Harsanyi, in his work on so-called “extended preferences,” advanced a fruitful …

The Insignificance Of Proxy Access, Marcel Kahan, Edward B. Rock

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No abstract provided.

The Effect Of Allowing Pollution Offsets With Imperfect Enforcement, Hilary A. Sigman, Howard F. Chang

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Several pollution control regimes, including climate change policies, allow polluters in one sector subject to an emissions cap to offset excessive emissions in that sector with pollution abatement in another sector. The government may often find it more costly to verify offset claims than to verify compliance with emissions caps, and concerns about difficulties in enforcement may lead regulators to restrict the use of offsets. In this paper, we demonstrate that allowing offsets may increase pollution abatement and reduce illegal pollution, even if the government has a fixed enforcement budget. We explore the circumstances that may make it preferable to …

Future Generations: A Prioritarian View, Matthew D. Adler

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Should we remain neutral between our interests and those of future generations? Or are we ethically permitted or even required to depart from neutrality and engage in some measure of intergenerational discounting? This Article addresses the problem of intergenerational discounting by drawing on two different intellectual traditions: the social welfare function (“SWF”) tradition in welfare economics, and scholarship on “prioritarianism” in moral philosophy. Unlike utilitarians, prioritarians are sensitive to the distribution of well-being. They give greater weight to well-being changes affecting worse-off individuals. Prioritarianism can be captured, formally, through an SWF which sums a concave transformation of individual utility, rather …

Nonrivalry And Price Discrimination In Copyright Economics, John P. Conley, Christopher S. Yoo

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The literature on the economics of copyright proceeds from the premise that copyrightable works constitute pure public goods, which is generally modeled by assuming that such works are nonexcludable and that the marginal cost of making additional copies is essentially zero. A close examination of the foundational literature on public goods theory reveals that the defining characteristic of public goods is instead the optimality criterion known as the “Samuelson condition,” which implies that the systematic bias toward underproduction is the result of the inability to induce consumers to reveal their preferences rather than the inability to exclude or price at …

Reconceptualizing Trespass, Gideon Parchomovsky, Alex Stein

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This Essay addresses an anomaly in trespass law. Trespass law is generally understood as the paradigmatic example of property-rule protection: an owner can obtain an injunction against the trespasser and have him removed from her land. The property-rule protection enjoyed by the owner protects her right to exclude others and to set the price for the use of her property. However, the property-rule protection only exists ex ante: it avails only against imminent or ongoing trespasses. Ex post, after a trespass ends, the owner can only recover compensation measured by the market value of the unauthorized use, i.e., the going …

Network Neutrality, Consumers, And Innovation, Christopher S. Yoo

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In this Article, Professor Christopher Yoo directly engages claims that mandating network neutrality is essential to protect consumers and to promote innovation on the Internet. It begins by analyzing the forces that are placing pressure on the basic network architecture to evolve, such as the emergence of Internet video and peer-to-peer architectures and the increasing heterogeneity in business relationships and transmission technologies. It then draws on the insights of demand-side price discrimination (such as Ramsey pricing) and the two-sided markets, as well as the economics of product differentiation and congestion, to show how deviating from network neutrality can benefit consumers, …

Keeping The Internet Neutral?: Tim Wu And Christopher Yoo Debate, Tim Wu, Christopher S. Yoo

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"Net neutrality" has been among the leading issues of telecommunications policy this decade. Is the neutrality of the Internet fundamental to its success, and worth regulating to protect, or simply a technical design subject to improvement? In this debate-form commentary, Tim Wu and Christopher Yoo make clear the connection between net neutrality and broader issues of national telecommunications policy.

Mandating Access To Telecom And The Internet: The Hidden Side Of Trinko, Daniel F. Spulber, Christopher S. Yoo

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Antitrust has long played a major role in telecommunications policy, demonstrated most dramatically by the equal access mandate imposed during the breakup of AT&T. In this Article we explore the extent to which antitrust can continue to serve as a source of access mandates following the Supreme Court's 2004 Trinko decision. Although Trinko sharply criticized access remedies and antitrust courts' ability to enforce them, it is not yet clear whether future courts will interpret the opinion as barring all antitrust access claims. Even more importantly, the opinion contains language hinting at possible bases for differentiating among different types of access, …

Network Neutrality And The Economics Of Congestion, Christopher S. Yoo

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No abstract provided.

The Corporate Form As A Solution To A Discursive Dilemma, Edward B. Rock

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I examine the connection between the discursive dilemma and corporate law. The discursive dilemma (or doctrinal paradox) is a distinctive social choice problem that was first identified by Kornhauser and Sager and later used as the basis for a theory of organizational personality by Pettit. I examine the ways in which the corporate form prevents the emergence of the discursive dilemma in the firm context and the extent to which the presence of the discursive dilemma can provide the foundation for a theory of corporate personality.

Architectural Censorship And The Fcc, Christopher S. Yoo

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Most First Amendment analyses of U.S. media policy have focused predominantly on “behavioral” regulation, which either prohibits the transmission of disfavored content (such as indecent programming) or mandates the dissemination of preferred content (such as children’s educational programming and political speech). In so doing, commentators have largely overlooked how program content is also affected by “structural” regulation, which focuses primarily on increasing the economic competitiveness of media industries. In this Article, Professor Christopher Yoo employs economic analysis to demonstrate how structural regulation can constitute a form of “architectural censorship” that has the unintended consequence of reducing the quantity, quality, and …

Insuring Liability Risks, Tom Baker

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Recent dramatic increases in prices for medical liability insurance, directors and officers insurance, and other lines of commercial liability insurance, together with the exit of some insurers from those lines of business, has placed liability insurance on the public agenda. At the same time, asbestos and environmental losses continue to mount under general liability insurance policies sold long ago, when no one could have predicted the extent or cost of such losses. In combination, these and other related events have raised serious concerns about the insurability of liability risks and have prompted calls for dramatic efforts to roll back the …

Would Mandating Network Neutrality Help Or Hurt Broadband Competition? A Comment On The End-To-End Debate, Christopher S. Yoo

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No abstract provided.

“Black People’S Money”: The Impact Of Law, Economics, And Culture In The Context Of Race On Damage Recoveries, Regina Austin

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“’Black People’s Money’: The Impact of Law, Economics, and Culture in the Context of Race on Damage Recoveries” is one of a series of articles by the author dealing with black economic marginalization; prior work considered such topics as shopping and selling as forms of deviance, street vending, restraints on leisure, and the importance of informality in loan transactions. This article deals with the linkage between the social significance of black people’s money and its material value. It analyzes the construction of “black money,” its association with cash, and the taboos and cultural practices that assure that black money will …