Volume 14, Issue 3 -

This paper deals with the enforcement of merger control in the presence of remedies, and studies how merger remedies affect the deterrence accomplished by controlling mergers. We determine the optimal frequency of investigations launched by the agency, and find that when conditional approvals are possible, it may be harder to deter the most welfare-detrimental mergers, and the agency might have to investigate mergers more often. Furthermore, we find that remedies may very well decrease welfare. Finally, we show that our theoretical results help to understand some of the empirical findings in the literature.

This paper proposes a quantitative approach to study two methodological problems arising when a costly redistribution of resources is implemented through public policies or legal rules: (a) aggregating individual into social preferences and (b) choosing the object of maximization. We consider a redistribution intervention that reduces inequality but diminishes total wealth and we specify a set of social welfare functions combining different preferences aggregation methods and maximands. For each social welfare function, we calculate its “price of equity”, defined as the maximum fraction of total wealth that a society is willing to sacrifice in order to implement the redistribution. Comparing the prices for equity across different social welfare function specifications, we identify systematic relationships and we rank them according to the efficiency-equity orientation. Results show that social welfare functions characterized by aggregation methods conventionally considered equity-oriented may reject redistribution interventions that are evaluated as welfare-improving by social welfare functions using efficiency-oriented aggregation methods. Similarly, social welfare functions considered equity-oriented because using utility as object of maximization may reject distributive policies that are evaluated as welfare-improving by social welfare functions using wealth as maximand. We argue that the quantitative approach proposed, by expounding the trade-off between equity and efficiency connected to different social welfare functions, may prove useful in areas of public law where policy-makers have to engage in the choice of a normative criterion for the evaluation of social welfare. Additionally, our results may inform rule-makers interested in comparing the distributive effects of alternative legal rules in special circumstances where private remedies can efficiently achieve redistribution goals.

Although controversial, local and state governments draw on broad interpretations of the Fifth Amendment takings clause to justify using eminent domain for economic development. Previous studies examine such uses from the perspective of property rights and the scope and size of government. This paper addresses the fundamental question: Do states that grant local governments liberal eminent domain powers actually enjoy greater economic growth? This paper estimates how liberal eminent domain laws affect private sector employment growth across states while controlling for national trend and industry mix effects. The results clearly show that allowing local governments to use eminent domain for economic development does not lead to more private sector jobs.

When choosing between two goods, consumers anticipate the utility they expect to derive from each product. However, such anticipations are subject to several sources of error, such as quality or price misperception and overoptimism about one’s capacity to use a product. The present paper studies the effect of inaccurate utility anticipations on consumer choice and ultimately on the market outcome in a vertically differentiated duopoly. I come to the conclusion that utility misperception can lead consumers to make suboptimal decisions ex post , although the choice seemed rational at the time of purchase. I show that in a vertically differentiated duopoly, firms are subject to two opposite incentives regarding consumer education. Moreover, the firms’ incentives to educate consumers are not necessarily aligned with the socially efficient outcome. Therefore, this paper also explores several policies aimed at mitigating the negative consequences of consumer misperception.

We study the effectiveness of licenses in environments with corruption. We expand the standard model so that bribery is feasible not only when licenses are granted but also when enforced or verified. This modification alters many prior results on bribery and licensing significantly. Specifically, we show that in some cases penalties for bribery at the license-granting stage complement penalties for bribery at the permit-enforcement stage. In other cases, they act as substitutes for each other. These results are especially important for often used regulatory policies in which licenses are used in conjunction with some form of subsequent license verification. Thus, our model suggests that studying the impact of bribery at the license-granting stage should not be conducted without simultaneously studying bribery at the permit verification stage.

Chinese judicial opinions were, for a long time, not readily accessible even by the courts. But an emerging norm of judicial transparency, coupled with the technological advances of the last decade, has resulted in the accumulation of vast bodies of cases available for consultation by both the lay and the learned. These recent developments in the Chinese legal landscape allow judges to influence and be influenced by the decisions of judges sitting in other courts. This project is the first to adopt an experimental approach to evaluating the influence of prior judicial decisions on Chinese judges. We find that citation of a case out of a sister court had a substantial and statistically significant effect on judges’ interpretation of a vague, permissive, legal standard. This effect was not, however, accompanied by a reduction in the length of sentences awarded by judges. An additional study suggests that prior judicial decisions have an indistinguishable influence on judges and law students, indicating that role and environment are unlikely to be the explanation for the main result.