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Bargaining with Double Jeopardy

admin — Tue, 17 Jan 2012 23:45:56 +0000

The Journal of Legal Studies, Volume 40, Issue 2, Page 273-293, June 2011.

Do Standards of Review Matter? The Case of Federal Criminal Sentencing

admin — Tue, 17 Jan 2012 23:45:44 +0000

The Journal of Legal Studies, Volume 40, Issue 2, Page 405-437, June 2011.

Soft Negligence Standards and the Strategic Choice of Firm Size

admin — Tue, 17 Jan 2012 23:45:42 +0000

The Journal of Legal Studies, Volume 40, Issue 2, Page 439-466, June 2011.

The Economics of International Refugee Law

admin — Tue, 17 Jan 2012 23:45:38 +0000

The Journal of Legal Studies, Volume 40, Issue 2, Page 367-404, June 2011.

Does Law Matter? Theory and Evidence from Single-Subject Adjudication

admin — Tue, 17 Jan 2012 23:45:29 +0000

The Journal of Legal Studies, Volume 40, Issue 2, Page 333-365, June 2011.

Judicial Expenditures and Litigation Access: Evidence from Auto Injuries

admin — Tue, 17 Jan 2012 23:45:27 +0000

The Journal of Legal Studies, Volume 40, Issue 2, Page 295-332, June 2011.

The Multiple-Stage Process of Judicial Review: Facial and As-Applied Constitutional Challenges to Legislation before the U.S. Supreme Court

admin — Tue, 17 Jan 2012 23:45:23 +0000

The Journal of Legal Studies, Volume 40, Issue 2, Page 467-502, June 2011.

Optimal Remedies for Bilateral Contracts

admin — Fri, 20 May 2011 20:26:33 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page 245-271, January 2011.

Optimal Remedies for Bilateral Contracts

admin — Fri, 20 May 2011 20:26:33 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page 245-271, January 2011.

Judicial Deference to Inconsistent Agency Statutory Interpretations

admin — Fri, 20 May 2011 20:22:27 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page 85-113, January 2011.

Judicial Deference to Inconsistent Agency Statutory Interpretations

admin — Fri, 20 May 2011 20:22:27 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page 85-113, January 2011.

Household Consumption and Personal Bankruptcy

admin — Fri, 20 May 2011 20:15:09 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page 1-37, January 2011.

Household Consumption and Personal Bankruptcy

admin — Fri, 20 May 2011 20:15:09 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page 1-37, January 2011.

International Trade, National Treatment, and Domestic Regulation

admin — Fri, 20 May 2011 20:11:39 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page 149-203, January 2011.

International Trade, National Treatment, and Domestic Regulation

admin — Fri, 20 May 2011 20:11:39 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page 149-203, January 2011.

The Right to Withdraw in Contract Law

admin — Fri, 20 May 2011 20:07:26 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page 115-148, January 2011.

The Right to Withdraw in Contract Law

admin — Fri, 20 May 2011 20:07:26 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page 115-148, January 2011.

An Institutionalization Effect: The Impact of Mental Hospitalization and Imprisonment on Homicide in the United States, 1934–2001

admin — Fri, 20 May 2011 20:03:35 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page 39-83, January 2011.

An Institutionalization Effect: The Impact of Mental Hospitalization and Imprisonment on Homicide in the United States, 1934–2001

admin — Fri, 20 May 2011 20:03:35 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page 39-83, January 2011.

Motions for Lead Plaintiff in Securities Class Actions

admin — Fri, 20 May 2011 19:58:57 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page 205-244, January 2011.

Motions for Lead Plaintiff in Securities Class Actions

admin — Fri, 20 May 2011 19:58:57 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page 205-244, January 2011.

Tribute to Eric Posner

admin — Fri, 20 May 2011 19:58:46 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page iii, January 2011.

Tribute to Eric Posner

admin — Fri, 20 May 2011 19:58:46 +0000

The Journal of Legal Studies, Volume 40, Issue 1, Page iii, January 2011.

A Theory of Loopholes

admin — Tue, 23 Mar 2010 15:38:01 +0000

The Journal of Legal Studies, Volume 39, Issue 1, Page 1-31, January 2010.

Abstract Laws are known to be replete with loopholes. The reason is generally thought to lie in the divergence between the text and the purpose of a law. Practical constraints supposedly make laws unavoidably over‐ or underinclusive. Lawyers who exploit loopholes are thought to be taking advantage of that over‐ and underinclusiveness. This essay offers a different perspective. Most loopholes have nothing to do with the over‐ or underinclusiveness of rules. This is best seen by exploring a particular subset of rules that reveal most clearly what is going on: the rules of voting. Arrow’s famous theorem teaches us that all halfway decent voting rules are vulnerable to agenda manipulation. Fundamentally, it will turn out, all legal rules are analogous to voting rules and all loophole exploitation analogous to agenda manipulation. The loophole‐exploiting lawyer no more deserves to be criticized, sanctioned, or otherwise frustrated in his efforts than does the shrewd parliamentarian.

The Fashion Lottery: Cooperative Innovation in Stochastic Markets

admin — Tue, 23 Mar 2010 15:37:21 +0000

The Journal of Legal Studies, Volume 39, Issue 1, Page 159-200, January 2010.

Abstract The fashion market is an anomaly: innovation is vigorous, but original producers are substantially unprotected against imitation. We account for this anomaly through a cooperative innovation model in which producers prefer an incomplete property regime that permits some imitation to alternative regimes that permit no imitation or all imitation, independent of budget constraints. A property regime that permits positive but limited levels of imitation operates as a collective insurance mechanism that alleviates the risk of recoupment failure in a market characterized by demand uncertainty, long lead times, skewed returns, and rapid product obsolescence. This model is compatible with producers’ selective enforcement of intellectual property protections, privately administered quasi‐copyright schemes, and institutional mechanisms that facilitate seasonal coordination of design outcomes. This model potentially generalizes to certain other markets in which innovation persists despite substantial imitation.

The Market Reaction to Legal Shocks and Their Antidotes: Lessons from the Sovereign Debt Market

admin — Tue, 23 Mar 2010 15:37:13 +0000

The Journal of Legal Studies, Volume 39, Issue 1, Page 289-324, January 2010.

Abstract In September 2000, a Brussels court ruled in favor of a hedge fund that held an unpaid debt claim against the Republic of Peru. The decision was based on a novel interpretation of the common pari passu clause. Policy makers and practitioners suggested that this decision signaled a paradigm shift that caused a significant increase in the risk of holdout litigation faced by sovereign debtors. Over the ensuing years, multiple reform solutions were implemented including the revision of certain contractual terms, the filing of amicus briefs in a key New York case, and the passage of legislation in Belgium. This article investigates whether the markets perceived an increase in risk in sovereign debt in the wake of the Brussels court decision. And, to the extent the markets reacted to the increase in legal risk, did any of the antidotes that were implemented to reduce the supposed increased holdout risk work?

Revisiting the Debate over Attorneys’ Contingent Fees: A Behavioral Analysis

admin — Tue, 23 Mar 2010 15:36:43 +0000

The Journal of Legal Studies, Volume 39, Issue 1, Page 245-288, January 2010.

Abstract Building on Kahneman and Tversky’s prospect theory, this paper presents a series of experiments designed to reveal people’s preferences regarding attorneys’ fees. Contrary to common economic wisdom, it demonstrates that loss aversion (rather than risk aversion or incentivizing the lawyer to win the case) plays a major role in clients’ preferences for contingent‐fee arrangements. Facing a choice between a mixed gamble and a pure positive one, plaintiffs prefer a contingent fee (framed as a pure positive gamble), even if it yields an expected fee that is 2 or 3 times higher than a noncontingent one (framed as a mixed gamble). At the same time, defendants, who face a choice between two pure negative gambles, are typically risk seeking and prefer fixed fees. Our findings indicate that information problems and lack of alternative fee arrangements probably do not loom large in clients’ choice of fee arrangement. We discuss the policy implications of our findings.

Attorneys as Arbitrators

admin — Tue, 23 Mar 2010 15:36:40 +0000

The Journal of Legal Studies, Volume 39, Issue 1, Page 109-157, January 2010.

Abstract We study the role of attorneys as arbitrators in securities arbitration. We find that arbitrators who also represent brokerage firms or brokers in other arbitrations award significantly less compensation to investor‐claimants than do other arbitrators. We find no significant effect for attorney‐arbitrators who represent investors or both investors and brokerage firms. The relation between representing brokerage firms and arbitration awards remains significant even when we control for political outlook. Arbitrators who donate money to Democratic political candidates award greater compensation than do arbitrators who donate to Republican candidates. We also study the dynamics of panel interaction. We find that the position of chair is an important factor in assessing an arbitrator’s influence, although the financial relationships of other arbitrators may also affect arbitration awards. Coalitions with the other arbitrators are also important. If the chair and another panelist possess a common attribute, the effect on the arbitration award increases.

On the Design of the Appeals Process: The Optimal Use of Discretionary Review versus Direct Appeal

admin — Tue, 23 Mar 2010 15:36:28 +0000

The Journal of Legal Studies, Volume 39, Issue 1, Page 63-108, January 2010.

Abstract The socially desirable design of the appeals process is analyzed assuming that it may involve either an initial discretionary review proceeding—under which the appeals court would decide whether to hear an appeal—or else a direct appeal. Using a stylized model, I explain that the appeals process should not be employed when the appellant’s initial likelihood of success falls below a threshold, that discretionary review should be used when the likelihood of success lies in a midrange, and that direct appeal should be sought when this likelihood is higher. Further, I emphasize that appellants should often be able to choose between discretionary review and direct appeal, notably because appellants may elect discretionary review to save themselves (and thus the judicial system) expense. This suggests the desirability of a major reform of our appeals process: appellants should be granted the right of discretionary review along with the right that they now possess of direct appeal at the first level of appeals.

An Empirical Study of Compensation Paid in Eminent Domain Settlements: New York City, 1990–2002

admin — Tue, 23 Mar 2010 15:36:17 +0000

The Journal of Legal Studies, Volume 39, Issue 1, Page 201-244, January 2010.

Abstract No large‐scale empirical study on condemnation compensation has been done in the past 30 years. Several state legislatures, in response to Kelo v. City of New London, have changed laws to increase condemnation compensation, despite the lack of empirical grounds. To fill in the empirical gap, I use hedonic regression models and about 80,000 sales to estimate the fair market value (FMV) of 430 condemned properties whose owners reached compensation settlements with the condemnor, New York City, between 1990 and 2002. More than 50 percent of these condemnees were compensated with less than FMV, about 40 percent received more than FMV, and less than 10 percent received FMV. Owners of residential properties and nonresidential properties alike often received extreme compensations that are less than 50 percent or more than 150 percent of FMV. Extreme compensation results from bias‐prone and inaccurate appraisal methods. Using the available data, I find that compensation level does not correlate with any factor.

Saving Your Home in Chapter 13 Bankruptcy

admin — Tue, 23 Mar 2010 15:36:10 +0000

The Journal of Legal Studies, Volume 39, Issue 1, Page 33-61, January 2010.

Abstract This paper examines how filing for bankruptcy under Chapter 13 helps financially distressed homeowners. We develop a model of debtors’ decisions to default on their mortgages and file for bankruptcy and evaluate it using a new data set of debtors who filed for bankruptcy under Chapter 13 in 2006. We also examine the effect of introducing cram down of residential mortgages in Chapter 13, which would reduce the total amount that debtors owe. We find that 96 percent of Chapter 13 filers are homeowners and 79 percent of filers repay mortgage debt in their repayment plans, while just 9 percent of filers replay only unsecured debt in their plans. Thus, filers use Chapter 13 almost exclusively as a save‐your‐home procedure. Under current law, only about 1 percent of Chapter 13 filers who would otherwise have defaulted save their homes, but this fraction would increase to 10 percent if cram down were introduced. We estimate that the cost to lenders of cram down would be $264,000 per home saved and $30 billion in total.

Are “Pay Now, Terms Later” Contracts Worse for Buyers? Evidence from Software License Agreements

admin — Fri, 04 Sep 2009 19:37:10 +0000

The Journal of Legal Studies, Volume 38, Issue 2, Page 309-343, June 2009.

Abstract The rise of commerce over the Internet and telephone has led to widespread use of “pay now, terms later,” or rolling, standard‐form contracts, in which buyers are not able to read the standard terms until after they have purchased the product. While some scholars and judges argue that rolling contracts do not merit special attention, others, including consumer advocates, are concerned that sellers take advantage of delayed disclosure by hiding especially unfavorable terms. I find no evidence for this view. In a large sample of software license agreements, I find that software publishers that use rolling contracts for their online sales do not offer more one‐sided terms than those who make their licenses available prior to purchase. The results suggest that to the extent there are inefficiencies associated with standard‐form contracts, they are not made worse by delayed disclosure.

Less Can Be More: Conflicting Ballot Proposals and the Highest Vote Rule

admin — Fri, 04 Sep 2009 19:37:08 +0000

The Journal of Legal Studies, Volume 38, Issue 2, Page 383-418, June 2009.

Abstract This paper examines conflicting ballot proposals—two or more measures that run contrary to one another and that citizens vote on in the same election. Sometimes a majority votes in favor of more than one conflicting proposal, generating a legal impasse that courts resolve by applying the “highest vote rule.” The rule upholds the proposal that received the greatest number of affirmative votes and invalidates all competing proposals, even though they also garnered majority support. Using spatial models, we show that the proposal receiving the most votes is not systematically closest to the median voter’s ideal point, and consequently the rule can generate antimajoritarian outcomes. We discuss the implications of our finding, analyze and reject existing alternatives to the highest vote rule, and propose an original solution to the problem.

Bargaining around Bankruptcy: Small Business Workouts and State Law

admin — Fri, 04 Sep 2009 19:36:53 +0000

The Journal of Legal Studies, Volume 38, Issue 2, Page 255-307, June 2009.

Abstract Federal bankruptcy law is rarely used by distressed small businesses. For every 100 that suspend operations, at most 20 file for bankruptcy. The rest use state law procedures to liquidate or reorganize. This paper documents the importance of these procedures and the conditions under which they are chosen using firm‐level data on Chicago‐area small businesses. I show that business owners bargain with senior lenders over the resolution of financial distress. Federal bankruptcy law is invoked only when bargaining fails. This tends to occur when there is more than one senior lender or when the debtor has defaulted on senior debt (harming trust‐based relationships with lenders). These findings raise questions about the design of and need for federal bankruptcy law.

Citation to Legislative History: Empirical Evidence on Positive Political and Contextual Theories of Judicial Decision Making

admin — Fri, 04 Sep 2009 19:36:48 +0000

The Journal of Legal Studies, Volume 38, Issue 2, Page 419-443, June 2009.

Abstract We present empirical evidence suggesting that political context—judicial hierarchy and judicial panel dynamics—influences an authoring judge’s use of legislative history. Specifically, we find that to the extent that political ideology matters, a district court judge’s choice of legislative history is influenced, albeit modestly, by (1) the political makeup of the overseeing circuit court and (2) the political characteristics of a judge’s panel colleagues, as well as by the circuit court as a whole. These factors matter more than the authoring judge’s own political‐ideological connection to the legislators. Put differently, an authoring judge will have a greater tendency to cite legislative history by legislators who share political party affiliation with the colleagues and superiors of the authoring judge than legislators sharing the same political party affiliation as the authoring judge himself. These findings are consistent generally with positive political and contextual theories of judicial persuasion, collegiality, and strategic decision making.

Constitutional Agreement during the Drafting of the Constitution: A New Interpretation

admin — Fri, 04 Sep 2009 19:36:45 +0000

The Journal of Legal Studies, Volume 38, Issue 2, Page 533-567, June 2009.

Abstract We provide a new interpretation of one of the “great” but in our view “failed” North‐South agreements during the U.S. Constitution’s drafting. In 1787, lower South delegates to the Constitutional Convention reputedly settled for a simple‐majority congressional vote for commercial regulations in exchange for northern delegates reputedly agreeing to limitations on national slave import restrictions and an export tariff prohibition. We document that the overall South gained little from the agreement because (1) import taxes are de facto export taxes, (2) the simple‐majority rule was costly to southern interests, and (3) the slave import provision was limited. The agreement represents serious economic and political miscalculation by southern framers. Because the agreement was at a constitutional level, it endowed the nation with decades of unforeseen and unintended constitutional and sectional conflict that played a critical role in American public finance and southern secession and has important implications for contemporary constitution making.

Conflicts of Interest, Disclosure, and (Costly) Sanctions: Experimental Evidence

admin — Fri, 04 Sep 2009 19:36:38 +0000

The Journal of Legal Studies, Volume 38, Issue 2, Page 505-532, June 2009.

Abstract Conflicts of interest may compromise individuals’ independence in providing advisory services. Full disclosure is a commonly recommended remedy for the adverse effect of conflicts of interest. Yet prior study shows that disclosure may not have the intended effect because it provides individuals with moral license to engage in self‐interested behavior, thereby exacerbating biases. We follow up on this research and seek to determine whether other institutional factors may negate the potentially harmful effects of disclosure. We conduct a laboratory experiment, focusing on behavior in an investor/financial adviser dyad, including important representative features in this setting. Our results suggest that disclosure is not necessarily detrimental. We find that investors are better off when conflicts of interest are disclosed and sanctions are available, even though initiating sanctions is costly to investors. Under such conditions, advisers’ bias is dampened markedly.

Do Norms Reduce Torture?

admin — Fri, 04 Sep 2009 19:36:36 +0000

The Journal of Legal Studies, Volume 38, Issue 2, Page 445-470, June 2009.

Abstract One of the most important developments in international political and legal theory over the last 15 years has been the assertion that norms affect state behavior. Scholars have claimed that states are constrained by norms of appropriate behavior and furthermore that norms actually change (“reconstitute”) states’ understandings of their interests, thereby leading states to adapt their behavior in accordance with these new understandings. We test the proposition that norms alter state behavior with respect to the expanding international norm against torture from 1985 through 2003. Unfortunately, we find no evidence that the spreading of the international norm against torture, measured by the percentage of countries in the world that have acceded to the United Nations Convention against Torture, has led to any reduction in torture according to a variety of measures.

All‐or‐Nothing versus Proportionate Damages

admin — Fri, 04 Sep 2009 19:36:32 +0000

The Journal of Legal Studies, Volume 38, Issue 2, Page 345-382, June 2009.

Abstract This paper considers the choice between an all‐or‐nothing (AON) rule and a proportionate‐damages (PD) rule in civil litigation. Under AON, a prevailing plaintiff receives a judgment equal to his entire damages. Under PD, damages are reduced to reflect uncertainty. For example, if the trier of fact finds that there is a 75 percent chance that the defendant is liable, the judgment would equal 75 percent of the plaintiff’s damages. Using a moral hazard model that takes into account defendants’ decisions to comply with legal rules, evidentiary uncertainty, and settlement, we show that AON usually maximizes the rate of compliance, although it may result in a higher level of litigation. This, in turn, provides an efficiency rationale for the ubiquity of AON in the legal system.

The Laws of Lawlessness

admin — Fri, 04 Sep 2009 19:36:11 +0000

The Journal of Legal Studies, Volume 38, Issue 2, Page 471-503, June 2009.

Abstract According to conventional wisdom, self‐governance cannot facilitate order between the members of different social groups. This is considered particularly true for the members of social groups who are avowed enemies of one another. This paper argues that self‐governance can do this. To investigate my hypothesis, I examine the Anglo‐Scottish borderlands in the sixteenth century. The border people belonged to two social groups at constant war with one another. These people pillaged and plundered one another as a way of life they called “reiving.” To regulate this system of intergroup banditry and prevent it from degenerating into chaos, border inhabitants developed a decentralized system of cross‐border criminal law called the Leges Marchiarum. These laws of lawlessness governed all aspects of cross‐border interaction and spawned novel institutions of their enforcement. The Leges Marchiarum and its institutions of enforcement created a decentralized legal order that governed intergroup relations between hostiles along the border.