The Accident Externality From Driving, Aaron S. Edlin, Pinar Karaca Mandic
Sep 2006
The Accident Externality From Driving, Aaron S. Edlin, Pinar Karaca Mandic
Aaron Edlin
We estimate auto accident externalities (more specifically insurance externalities) using panel data on state-average insurance premiums and loss costs. Externalities appear to be substantial in traffic-dense states: in California, for example, we find that the increase in traffic density from a typical additional driver increases total state wide in-surance costs of other drivers by $1,725–$3,239 per year, depending on the model. High–traffic density states have large economically and statistically significant externalities in all specifications we check. In contrast, the accident externality per driver in low-traffic states appears quite small. On balance, accident externalities are so large that a correcting Pigouvian …
Stopping Above-Cost Predatory Pricing, Aaron S. Edlin
Dec 2001
Stopping Above-Cost Predatory Pricing, Aaron S. Edlin
Aaron Edlin
Since 1993 when the Supreme Court decided Brooke Group, no predatory pricing plaintiff has prevailed in a final determination in the federal courts. This decision was the ultimate triumph of the Chicago School antitrust scholars and judges like Frank Easterbrook, who have argued that predation is like dragons and that there is no sufficient reason for antitrust law or the courts to take it seriously. This article argues, however, that the Court's reading of the law is unduly narrow and should be revisited. There is no compelling reason to restrict predation cases to below-cost pricing, as above-cost pricing can also …
Is Perfect Price Discrimination Really Efficient? Welfare And Existence In General Equilibrium, Aaron S. Edlin, Mario Epelbaum, Walter P. Heller
Nov 1998
Is Perfect Price Discrimination Really Efficient? Welfare And Existence In General Equilibrium, Aaron S. Edlin, Mario Epelbaum, Walter P. Heller
Aaron Edlin
We examine the welfare properties of surplus maximization by embedding a perfectly discriminating monopoly in an otherwise standard Arrow-Debreu economy. Although we discover an inefficient equilibrium, we validate that equilibria are efficient provided that the monopoly goods are costly, and (ii) that a natural monopoly can typically use personalized two-part tariffs in these equilibria. However, we find that Pareto optima are sometimes incompatible with surplus maximization, even when transfer payments are used. We provide insight into the source of this difficulty and give some instructive examples of economies where a second welfare theorem holds.
Holdups, Standard Breach Remedies, And Optimal Investment, Aaron S. Edlin, Stefan J. Reichelstein
Jun 1996
Holdups, Standard Breach Remedies, And Optimal Investment, Aaron S. Edlin, Stefan J. Reichelstein
Aaron Edlin
In bilateral trading problems, the parties may be hesitant to make relationship-specific investments without adequate contractual protection. We postulate that the parties can sign noncontingent contracts prior to investing, and can freely renegotiate them after information about the desirability of trade is revealed. We find that such contracts can induce one party to invest efficiently when courts impose either a breach remedy of specific performance or expectation damages. Moreover, specific performance can induce both parties to invest efficiently if a separability condition holds. Expectation damages, on the other hand, is poorly suited to solve bilateral investment problems.
