Law and Economics Commons^™

For-Profit Managers As Public Fiduciaries: A Neo-Classical Republican Perspective, Rob Atkinson

Scholarly Publications

This Article examines the fiduciary duties of for-profit managers in modern liberal society. To arrive at the right "mix" of these duties, it compares the fiduciary duties implied by a standard descriptive model of our society with two competing normative models: Lockean libertarianism on the "right" and neo-classical republicanism on the "left." This comparison shows that all three versions of liberalism, even the one with a Lockean nightwatchman state, require far more extensive duties than we now expect, including a professionalization of management itself. And it shows that the version of liberalism with the most expansive state, neo-classical republicanism, requires …

Placebo Marks, Jake Linford

Scholarly Publications

Scholars often complain that sellers use trademarks to manipulate consumer perception. This manipulation ostensibly harms consumers by limiting their ability to make informed choices. For example, holding other things constant, consumers spend more money on goods with a high-performance reputation. Critics characterize that result as wasteful, if not anticompetitive. But recent marketing research shows that trademarks with a high-performance reputation may sometimes influence perception to the benefit of the consumer.

A trademark with a high-performance reputation can deliver a performance-enhancing placebo effect. Research subjects perform better at physical and mental tasks when they prepare or play with a product bearing …

Digital Surveillance And Preventive Policing, Manuel A. Utset

Scholarly Publications

No abstract provided.

Vicarious Windfalls, Justin Sevier

Scholarly Publications

The vicarious liability doctrine, which holds third parties responsible for the legal obligations of their duly authorized agents, was designed in part to ensure that tort victims are not undercompensated by insolvent agent wrongdoers. But many legal scholars are highly critical of the doctrine and suggest that fact finders’ systematic biases-particularly with respect to corporate third parties-cause unworthy tort plaintiffs to be overcompensated at the expense of innocent, deep-pocket corporate defendants. These scholars have offered little empirical evidence for these claims and, in fact, behavioral research suggests that their predictions are incorrect.

This Article introduces the concept of the vicarious …

Inefficient Inequality, Shi-Ling Hsu

Scholarly Publications

For the past several decades, much American lawmaking has been animated by a concern for economic efficiency. At the same time, broad concerns over wealth and income inequality have roiled American politics, and still loom over lawmakers. It can be reasonably argued that a tension exists between efficiency and equality, but that argument has had too much purchase over the past few decades of lawmaking. What has been overlooked is that inequality itself can be allocatively inefficient when it gives rise to collectively inefficient behavior. Worse still, some lawmaking only masquerades as being efficiency-promoting; upon closer inspection, some of this …

Shareholder Political Primacy, Jay B. Kesten

Scholarly Publications

Corporate political activity raises an important and diffcult question of corporate law: who decides when the corporation should speak and what it should say? In several cases, the Supreme Court has provided a clear answer: shareholders, acting through the procedures of corporate democracy. While this holding has attracted substantial academic and public criticism, there has been no sustained evaluation (beyond identifying the potential agency costs of corporate political activity) of the possibility that the Supreme Court's appeal to the fraught concept of "corporate democracy," though woefully under-theorized, might be the best allocation of power in the limited context of corporate …

Duress As Rent-Seeking, Mark Seidenfeld, Murat C. Mungan

Scholarly Publications

No abstract provided.

Adjudicating Corporate Auctions, Jay B. Kesten

Scholarly Publications

In light of recent developments in auction theory, this Article re-examines Delaware corporate law governing directors' actions when structuring the sale of a corporation. A foundational doctrine of Delaware law is that when the board of directors resolves to sell a corporation, it must obtain the highest price reasonably available. Auction theory posits that, in certain circumstances germane to corporate takeovers, revenues can be maximized through the use of ex ante precommitments to the rules of the auction. Delaware law, however, does not fully endorse directors' ability to make such precommitments, primarily out of the concern that the board will …

Political Uncertainty And The Market For Ipos, Jay B. Kesten, Murat C. Mungan

Scholarly Publications

No abstract provided.

Investments To Make Threats Credible, Rent-Seeking, And Duress, Mark Seidenfeld, Murat C. Mungan

Scholarly Publications

Existing literature on the contract law doctrine of duress identifies a number of tests to determine conditions under which a contract can be voided. No article provides a specific and formal economic analysis on the link between rent-seeking and the conditions under which allowing a defense of duress is wealth enhancing. This article shows that commitments made as a result of ex ante investments by threatening parties made solely for the purpose of transferring, rather than creating wealth, ought to be voidable. We discuss cases in which a test based on rent-seeking enhances efficiency where previously proposed tests do not.

Private Ordering Under Threat Of Regulation, Jake Linford

Scholarly Publications

No abstract provided.

Public Law At The Cathedral: Enjoining The Government, Michael T. Morley

Scholarly Publications

Conventional wisdom provides that injunctive relief in public law cases is generally unnecessary, because a declaratory judgment and the threat of damages are enough to induce the government to comply with a court’s ruling (except, perhaps, in the institutional reform context). Consistent with this prevailing understanding, most scholars to apply Calabresi and Melamed’s Cathedral framework to public law have concluded that nearly all constitutional rights are protected by property rules, regardless of whether a rightholder actually is protected by an injunction, or instead merely has a substantial likelihood of obtaining one if she goes to court.

This Article challenges this …

A Behavioral Justification For Escalating Punishment Schemes, Murat C. Mungan

Scholarly Publications

The standard two-period law enforcement model is considered in a setting where individuals usually, but not exclusively, commit crimes only after comparing expected costs and benefits. Where escalating punishment schemes are present, there is an inherent value in keeping a clean criminal record; a person with a record may unintentionally become a repeat offender if he fails to exert self-control, and be punished more severely. If the punishment for repeat offenders is sufficiently high, one may rationally forgo the opportunity of committing a profitable crime today to avoid being sanctioned as a repeat offender in the future. Therefore, partial deterrence …

Reverse Payments, Perverse Incentives, Murat C. Mungan

Scholarly Publications

No abstract provided.

Rational Criminal Addictions, Manuel A. Utset

Scholarly Publications

No abstract provided.

Inchoate Crimes Revisited: A Behavioral Economics Perspective, Manuel A. Utset

Scholarly Publications

No abstract provided.

Financial System Engineering, Manuel A. Utset

Scholarly Publications

No abstract provided.

Response To Comments By Professors Baer, Candeub, Medwed, Painter, And Prentice, Manuel A. Utset

Scholarly Publications

No abstract provided.

Corporate Actors, Corporate Crimes And Time-Inconsistent Preference, Manuel A. Utset

Scholarly Publications

No abstract provided.

Fundraising And Optimal Policy Rules, Murat C. Mungan, Bariş K. Yörük

Scholarly Publications

This paper develops a simple spatial model of fundraising, in which charities select a target population to solicit donations. First, we show that in a competitive charity market without any intervention, the number of charities in the market and/or the overall net funds raised by charities may be sub-optimal. Next, we analyze whether a social planner can prevent such shortcomings and show that a regulatory mechanism can be designed to achieve socially desirable outcomes. In contrast to the previous literature, our model does not necessarily produce monopoly as the optimal market structure. We show that if fixed costs associated with …

Re-Focusing On Philanthropy: Revising And Re-Orienting The Standard Model, Rob Atkinson

Scholarly Publications

This paper undertakes a detailed analysis of today's standard theory of the philanthropic sector to provide a new model that is both more accurate in its details and more comprehensive in its scope. The standard theory sees the philanthropic sector as subordinate and supplementary to our capitalist market economy and liberal democratic polity. That approach has a fundamental short-coming: its explanation of both the state and philanthropy as adjuncts to the market fails to appreciate the ways in which all three sectors support and supplement each other. The standard model's primary focus on the market ignores how the demands that …

Don't Say You're Sorry Unless You Mean It: Pricing Apologies To Achieve Credibility, Murat C. Mungan

Scholarly Publications

Remorse and apologies by offenders have not been rigorously analyzed in the law and economics literature. This is perhaps because apologies are regarded as ’cheap talk’ and are deemed to be non-informative of an individual’s conscious state. In this paper, I develop a formal framework in which one can analyze remorse and apologies. I argue that legal procedures can be designed to price apologies, such that only truly remorseful individuals apologize. Hence, apologies would not be mere ’cheap talk’ and could send correct signals regarding an offender’s true conscious state, making them credible. This will lead victims, upon receiving apologies, …

High-Powered (Mis)Incentives And Venture-Capital Contractors, Manuel A. Utset

Scholarly Publications

No abstract provided.

Economics Of The Independent Invention Defense Under Incomplete Information, Murat C. Mungan

Scholarly Publications

Patents lead to ex post deadweight loss arising from a noncompetitive market structure for the invention. Many have argued that introducing independent invention as a defense (IID) to patent infringement can increase social welfare by decreasing such deadweight loss at the price of a modest decrease in the number of inventions. This paper considers the effects of IID in a setting where R&D firms have incomplete information about their rivals. Four main results follow under incomplete information: (i) fewer things are invented under an IID regime; (ii) IID’s effects on welfare are ambiguous; (iii) IID is more likely to increase …

The Law And Economics Of Fluctuating Criminal Tendencies And Incapacitation, Murat C. Mungan

Scholarly Publications

Economic analyses of criminal law are frequently and heavily criticized for being unable to explain many criminal law rules and doctrines people find intuitively just. Existing economic models cannot properly explain, for instance, why criminal law distinguishes between (1) repeat offenders and first-time offenders, (2) murder and voluntary manslaughter, and (3) remorseful and non-remorseful offenders.

This Article proposes a richer economic theory of crime that captures the rationales behind these practices and potentially behind many other important criminal law principles and doctrines. Unlike an overwhelming majority of previous economic analyses, my theory accounts not only for the deterrent effect of …

Welfare Enhancing Regulation Exemptions, Murat C. Mungan

Scholarly Publications

Sanctions for regulation violations are used to deter conduct which could potentially result in great social harms. This practice over-deters talented entities and under-deters untalented entities, which leads to social losses. This paper analyzes whether and how such social losses can be mitigated. I show that this can be achieved by allowing regulatees to purchase passes exempting them from regulations at appropriate prices.

False Efficiency And Missed Opportunities In Law And Economics, Shawn J. Bayern

Scholarly Publications

This Article points out a simple flaw common to many law-and-economics analyses, ranging from fundamental models like the Hand Formula to narrower arguments like those that oppose the doctrine of unconscionability.

The flaw is straightforward: economic analyses of law often assume, either implicitly or explicitly that when it is more efficient for an activity to occur than for it not to occur it is efficient for legal rules to encourage the activity. Even on grounds of efficiency alone, however, knowing in isolation whether an activity produces more wealth than its absence is insufficient to conclude that the activity is efficient. …

Complex Financial Institutions And Systemic Risk, Manuel A. Utset

Scholarly Publications

No abstract provided.

Economics, Behavioral Biology, And Law, Erin O'Hara O'Connor

Scholarly Publications

This article compares the relevance to law of two unexpectedly similar fields: economics and behavioral biology. It first examines the assumptions, core concepts, methodological tenets, and emphases of the two fields. It then compares the interdisciplinary fields of law and economics, on one hand, with law and behavioral biology, on the other—highlighting not only important similarities but also important differences. The article subsequently explores ways that biological perspectives on human behavior may, among other things, improve economic models and the behavioral insights they generate. The article concludes that although there are important differences between the two fields, the overlaps between …

Keeping Republics Republican, Rob Atkinson

Scholarly Publications

No abstract provided.