• A Critique of 'Tangibility' as the Basis for Property Rules

      Ayres, Ian; Goldbart, Paul (2001-03-09)
      Kaplow and Shavell have recently claimed that property rules tend to protect tangible entitlements more efficiently than do liability rules. They argue that while liability rules tend to efficiently harness the defendant’s private information when courts are imperfectly informed as to litigants’ valuations of intangible entitlements, this harnessing effect does not apply to tangible entitlements for two reasons. First, they argue that the prospect of multiple takings (by others or even the original entitlement holder taking back the entitlement) makes it impossible to implement liability rules with regard to tangible entitlements. Second, they argue that liability rules cannot harness private information when the disputants’ valuations are correlated and that valuations of tangibles tend to be more correlated than valuations of intangibles. In this essay, we reject both the multiple-takings and the correlated-value claims. Our thesis is that, while both present real problems of implementation, the authors’ own harnessing result can be extended to redeem the usefulness of liability rules even when values are correlated and even when there is the prospect of multiple takings. We will show that, even in the presence of these problems, enlightened courts can manipulate the damages that takers expect to pay so as to induce efficient takings. The authors’ numeric examples purporting to show the dominance of property rules systematically understate the potential efficiency of liability rules. Their examples compare the more efficient property rules to liability rules that use inefficient damages and systematically delegate allocative authority to the less efficient litigant. If the more appropriate comparisons are made, in all of Kaplow and Shavell’s examples liability rules (which anticipate non-consensual takings) dominate property rules.
    • Optimal Delegation and Decoupling in the Design of Liability Rules

      Ayres, Ian; Goldbart, Paul (2001-03-09)
      The central allocative decision confronting a judge in a nuisance dispute should not concern the identity of the initial entitlement recipient but rather the identity of the more efficient chooser—the litigant who can more efficiently allocate the entitlement. We show that liability rules can produce four basic allocations which differ centrally in the ways in which courts delegate to litigants the authority to ultimately allocate the entitlement. Two classes concern "single chooser" rules that vest (in the absence of an agreement to the contrary) the allocative decision solely in one of the litigants. The other two classes concern a new type of rule, "dual chooser" rules, that allow either party to veto the transfer of an entitlement. Dualchooser rules are more than a theoretical curiosity both because they exist in our current law and because at times they produce systematically greater allocative efficiency than either type of single-chooser rule. Two heads are sometimes better than one. A central result of the paper is that in choosing among different liability rules allocative concerns can be decoupled from distributive concerns. There exist an infinite number of liability rules which produce each of the four basic allocations, but every rule within a particular class divides differently between the litigants the expected value of the allocation. To successfully decouple, courts should at times impose "call option," "put option," "Pay or be Paid," and "Pay or Pay" rules.
    • Substitutes for Insider Trading

      Ayres, Ian; Bankman, Joseph (2001-04-02)
      When insider trading prohibitions limit the ability of insiders (or of a corporation itself) to use material non-public information to trade a particular firm’s stock, there may be incentive to use the information to trade instead on the stock of that firm’s rivals, suppliers, customers, or the manufacturers of complementary products. We refer to this form of trading as trading in stock substitutes. Stock substitute trading by a firm is legal. In many circumstance, substitute trading by employees is also legal. Trading in stock substitutes may be quite profitable, and there is anecdotal evidence that employees often engage in such trading. Our analysis suggests that substitute trading is less socially desirable than traditional insider trading. We recommend a set of disclosure rules designed to clarify existing law and provide information on the extent of stock substitute trading. We also discuss possible changes in the law that might limit inefficient trading in stock substitutes.
    • Royalties for Artists Versus Royalties for Authors and Composers

      Hansmann, Henry (2001-04-11)
      Legislation creating or reinforcing resale royalties for visual artists retains substantial political popularity, particularly in the European Union -- despite the often skeptical attitude toward those rights in the economics literature. In this essay, we probe more deeply the affirmative arguments that can be made for a resale royalty right, in either a mandatory or a discretionary form. We also compare the rationale for visual artists’ resale royalties with the potential rationales for the now-well-established systems of royalty rights for authors and composers. This comparison has particular interest both because some of the principal arguments made against visual artists’ resale royalties also apply to authors’ royalties, and because the economic rationale for compensating authors with royalties has itself not been well explored. We also discuss briefly the related subject of display rights for visual artists. We conclude with some general implications for policy.
    • Sales and Elections as Methods for Transferring Corporate Control

      Gilson, Ronald; Schwartz, Alan (2001-04-13)
      Under standard accounts of corporate governance, capital markets play a significant role in monitoring management performance and, where appropriate, replacing management whose performance does not measure up. While the concept of a market for corporate control was once controversial, now even the American Law Institute acknowledges that "transactions in control and tender offers are mechanisms through which market review of the effectiveness of management's delegated discretion can operate. Recent case law in Delaware, however, appears to have altered dramatically the mechanisms through which the market for corporate control must operate. In particular, the interaction of the poison pill and the Delaware Supreme Court's development of the legal standard governing defensive tactics in response to tender offers have resulted in a decided, but as yet unexplained, preference for control changes mediated by means of an election rather than by a market. In this paper, we begin the evaluation of the preference for elections over markets that the Delaware Supreme Court has not yet attempted. We apply to this effort both doctrinal and insights derived from an interesting but complex formal literature that has developed to understand how voting structures work in political contests and jury deliberations. Since these contexts differ substantially from transfers of corporate control, our analysis raises a question of fit: are voting models suitable for analyzing the question asked here? In our view, the models do illuminate the takeover institution, but if this view is ultimately rejected, then we will have eliminated what at least superficially appears to be a useful set of tools. Part 1 provides a very brief account of the doctrinal development that has given us the current bias for elections, focusing on the last step in the process: the Delaware Supreme Court's decision in Unitrin, Inc. v. American General Corp. Part 2 then argues that economic efficiency, to be made precise in this context below, is the appropriate normative criterion for directing the choice between markets and elections as mechanisms for effecting a change in control that is resisted by management. Parts 3 and 4 next develop two models which show that elections can perform badly in proxy contests in which the principal issue is whether the target company should be sold or not. The first model assumes that shareholder voters are well informed about the economic variables of interest and the second supposes uncertainty about these variables. Market sales apparently lack the defects that these models show can affect elections. Current regulation, which facilitates competing bids, and current takeover technologies, which permit making them, would eliminate much of the inefficiency in takeover bidding that prior models have identified if bidders could make proposals directly to target shareholders. Then the target would be an auction seller. A standard result in auction theory is that if the seller chooses a revenue maximizing auction form it is a dominant strategy for bidders -- here potential acquirers -- to big their true valuations. The dominant strategy for a maximizing seller then is to accept the winning bid. Therefore, target shareholders would not be in a strategic situation in an auction world. As a consequence, we focus on the possible inefficiencies arising from a judicial preference for elections (in which it is optimal for shareholders to act strategically) over markets as a takeover mechanism. In Part 5, we return to doctrine to show how Unitrin's preference for elections over markets may be eliminated without requiring the Delaware Supreme Court to confess error. We also suggest that, for jurisdictions with courts less influential than those in Delaware, a statutory change to permit more sales of control would be best.
    • Assessing the Cost of Regulatory Protections: Evidence on the Decision to Sell Securities Outside the United States

      Choi, Stephen (2001-05-01)
      This paper examines the factors that affect the decision of U.S. companies to issue securities offshore compared with inside the United States. Utilizing a data set of 1,444 domestic private placements and offshore offerings from 1993 to 1997, the paper reports that firms that experienced a private securities fraud lawsuit in the past resort to foreign sources of capital more frequently. Similarly, companies in standard industrial classification groups that are targeted more often with private securities fraud litigation are also more likely to issue securities offshore than to conduct domestic private placements. Not all issuers, however, choose to exit the U.S. regime. The paper employs past experience with a SEC investigation as a proxy for the amount of risk that the issuer may pose to investors. Issuers with private securities fraud litigation experience that also encountered a past SEC investigation are more likely to raise capital through a domestic offering, consistent with the hypothesis that some issuers choose to raise capital in the United States when the bonding and signaling value of the U.S. legal liability regime outweighs the costs associated with antifraud liability.
    • Event Studies and the Law--Part I: Technique and Corporate Litigation

      Bhagat, Sanjai; Romano, Roberta (2001-05-01)
      Event studies are among the most successful uses of econometrics in policy analysis. By providing an anchor for measuring the impact of events on investor wealth, the methodology offers a fruitful means for evaluating the welfare implications of private and government actions. This paper is the first in a set of two papers that review the use and impact of the event study methodology in the legal domain. This paper begins by briefly reviewing the event study methodology and its strengths and limitations for policy analysis. It then reviews in detail how event studies have been used to evaluate the wealth effects of corporate litigation: Defendants experience economically-meaningful and statistically-significant wealth losses upon the filing of the suit, whereas plaintiff firms experience no significant wealth effects upon filing a lawsuit. Also, there is a significant wealth increase for defendant firms when they settle a suit with another firm, in contrast to other types of plaintiffs, and in contrast to the settling plaintiff firms. These findings suggest that, at a minimum, lawsuits are not a value-enhancing way for corporations to settle their disagreements with other corporations. In addition, the market appears to impose a higher sanction on firms than actual criminal sanctions, and reputational losses are of equal magnitude for civil fines as criminal ones. The paper concludes with some recommendations for researchers: The standards for conducting an event study are well established. Researchers can increase the power of an event study by increasing the sample size, and by narrowing the public announcement period to as short a time-frame as possible. The companion paper reviews the use of event studies in corporate law and regulation.
    • Event Studies and the Law: Part II--Empirical Studies and Corporate Law

      Bhagat, Sanjai; Romano, Roberta (2001-05-09)
      This paper is the second part of a review of the event study methodology, which has proved to be one of the most successful uses of econometrics in policy analysis. In this part we focus on the methodology’s application to corporate law and corporate governance issues. Event studies have played an important role in the making of corporate law and in corporate law scholarship. The reason for this input is twofold. First, there is a match between the methodology and subject matter: the goal of corporate law is to increase shareholder wealth and event studies provide a metric for measurement of the impact upon stock prices of policy decisions. Second, because the participants in corporate law debates share the objective of corporate law, to adopt policies that enhance shareholder wealth, their disagreements are over the means to achieve that end. Hence, the discourse can be empirically informed. The paper concludes by sketching the methodology’s use in evaluating the economic effects of regulation. While event studies’ usefulness for policy analysis is by now familiar in the corporate law setting, we hope that our two-part review will suggest appropriate applications to other fields of law.
    • Abortion and Crime: Unwanted Children and Out-of-Wedlock Births

      Lott, John; Whitley, John (2001-05-16)
      Abortion may prevent the birth of "unwanted" children, who would have relatively small investments in human capital and a higher probability of crime. On the other hand, some research suggests that legalizing abortion increases out-of-wedlock births and single parent families, which implies the opposite impact on investments in human capital and thus crime. The question is: what is the net impact? We find evidence that legalizing abortion increased murder rates by around about 0.5 to 7 percent. Previous estimates are shown to suffer from not directly linking the cohorts who are committing crime with whether they had been born before or after abortion was legal.
    • Non-Voted Ballots and Discrimination in Florida

      Lott, John (2001-07-09)
      The U.S. Commission on Civil Rights' Majority Report on the 2000 Presidential vote in Florida presents two types of empirical evidence that African-Americans were denied the right to vote. The report concluded that, "The Voting Rights Act prohibits both intentional discrimination and 'results' discrimination. It is within the jurisdictional province of the Justice Department to pursue and a court of competent jurisdiction to decide whether the facts prove or disprove illegal discrimination under either standard." To reach their conclusion that discrimination had occurred, the majority examined the impact of race on spoiled (or non-voted) ballot rates as well as the impact of race on the exclusion from voter eligibility lists because of past felony criminal records. They relied on empirical work regarding non-voted ballots and this empirical work relies solely on cross county regressions or correlations using data from 2000 alone. The evidence that African- Americans are erroneously placed on the ineligible list at higher rates than other racial groups is based upon a simple comparison of means.
    • The Need for Competition in International Securities Regulation

      Romano, Roberta (2001-08-06)
      This paper advocates opening up international securities regulation to greater regulatory competition than the scant competition that exists at present. After sketching the contours of an international regime of regulatory competition in securities laws and the reasons why such competition is desirable, the paper provides a detailed response to objections that have been raised to a proposal for a competitive securities regime that was principally focused on the United States, objections that would accordingly also be raised against this paper’s proposal. These include whether the U.S. securities regime is directed at mitigating problems regarding disclosure of interfirm externalities and whether international competition will result in a regulatory race to the lowest level of disclosure. Because the analysis in support of regulatory competition in securities law draws upon the learning regarding competition across U.S. states over the production of corporate law, which has been successful in creating a regime that, on balance, benefits shareholders, the paper concludes by demonstrating that recent critiques of the efficacy of statecharter competition are unfounded.
    • Should Campaign Donors Be Identified?

      Ayres, Ian (2001-08-29)
      About the only campaign finance issue on which there is a strong consensus is the belief that the law should force candidates to disclose the identity of contributors. A growing group of scholars and advocates believe that mandated disclosure should be the only campaign finance regulation; they argue that other restrictions are counterproductive because they tend to shift money to less accountable forms of political speech such as "independent expenditures" and "issue advocacy." Representative John T. Doolittle (R-Calif.) has proposed the "Citizen Legislature and Political Freedom Act" that essentially would repeal all limits on political campaign contributions and merely require immediate disclosure by candidates when they do receive contributions. This type of "pure disclosure" reform has garnered support from a wide spectrum of political activists, from Sen. Mitch McConnell (R-Ky.) to Stanford Law School dean Kathleen Sullivan. But there exists in our polity a counter-image--the voting booth--that stands against the cult of disclosure. Ballot secrecy was adopted toward the end of the nineteenth century to deter political corruption. Voting booth privacy disrupted the economics of vote buying, making it much more difficult for candidates to buy votes because, at the end of the day, they could never know for sure who voted for them. A similar pro-anonymity argument can be applied to campaign finance. We could harness similar anonymity benefits by creating a "donation booth": a screen that forces donors to funnel campaign contributions through blind trusts that would keep candidates from learning the identity of their supporters. Just as the secret ballot makes it more difficult for candidates to buy votes, mandating anonymous donations through a system of blind trusts might make it harder for candidates to sell access or influence because they would never know which donors had paid the price. Knowledge about whether the other side actually fulfills his or her promise is an important prerequisite for trade. People--including political candidates--are less likely to deal if they are uncertain whether the other side performs.
    • Trust, Honesty, and Corruption: Reflection on the State-Building Process

      Rose-Ackerman, Susan (2001-09-14)
      Trust implies confidence, but not certainty, that some person or institution will behave in an expected way. A trusting person decides to act in spite of uncertainty about the future and doubts about the reliability of others' promises. The need for trust arises from human freedom. As Piotr Sztompka (1999: 22) writes, "facing other people we often remain in the condition of uncertainty, bafflement, and surprise." Honesty is an important substantive value with a close connection to trust. Honesty implies both truth-telling and responsible behavior that seeks to abide by the rules. One may trust another person to behave honestly, but honesty is not identical to trustworthiness. A person may be honest but incompetent and so not worthy of trust. Nevertheless, interpersonal relationships are facilitated by the belief that the other person has a moral commitment to honesty or has an incentive to tell the truth. Corruption is dishonest behavior that violates the trust placed in a public official. It involves the use of a public position for private gain. I focus on honesty and trust as they affect the functioning of the democratic state and the market. I am interested in informal interactions based on affect-based trust only insofar as they substitute for, conflict with, or complement the institutions of state and market. The relationship between informal connections and formal rules and institutions is my central concern. The institutions of interest are democratic political structures, bureaucracies, law and the courts, and market institutions. As Mark Warren points out, governments are needed in just those situations in which people cannot trust each other voluntarily to take others' interests into account. The state is a way of managing inter-personal conflicts without resorting to civil war. Yet, this task is much more manageable if the citizenry has a degree of interpersonal trust and if the state is organized so that it is trusted by its citizens, at least, along some dimensions. The state may be able to limit its regulatory reach if interpersonal trust vitiates the need for certain kinds of state action (Offe 1999). Conversely, if the state is reliable and even-handed in applying its rules, that is, if people trust it to be fair, state legitimacy is likely to be enhanced (Offe 1999, Sztompka 1999: 135-136). Thus, there are three interrelated issues. First, do trust and reliability help democracy to function, and if so, how can they be produced? Second, do democratic governments help create a society in which trustworthiness and honesty flourish? Third, given the difficulty of producing trustworthiness and honesty, how can institutional reform be used to limit the need for these virtues? This paper provides a framework for thinking about these broad questions. Section I organizes the research on trust especially as it applies to the relationship between trust and government functioning. With this background, section II discusses the mutual interaction between trust and democracy. The alternative of limiting the need for trust leads, in section III, to a discussion of corruption in government and commercial dealings. Corruption occurs when dishonest politicians and public officials help others in return for payoffs. Because their actions are illegal, they need to trust their beneficiaries not to reveal their actions. Corrupt officials are also, of course, betraying the public trust insofar as their superiors are concerned. Reforms here can involve a reorganization of government to limit the scope for lucrative discretionary actions. Conversely, one might focus on changing the attitudes of both officials and private actors so that existing discretion is exercised in a fairer and more impartial manner. This paper analyzes the interactions between trust and democracy at a general level. However, its initial aim was to provide a context for a workshop at the Collegium Budapest on honesty, trust, and corruption in post-socialist countries. My companion paper in Kyklos makes that link explicit by bringing in survey evidence on public attitudes and behavior. Here, I conclude in section IV with some thoughts on the special character of the transition process. I highlight the tensions between interpersonal trust and trust in public institutions in the context of the transition to democracy and a market economy.
    • The Law and Economics of Costly Contracting

      Schwartz, Alan; Watson, Joel (2001-12-01)
      In most of the contract theory literature, contracting costs are assumed either to be high enough to preclude certain forms of contracting, or low enough to permit any contract to be written. Similarly, researchers usually treat renegotiation as either costless or prohibitively costly. This paper addresses the middle ground between these extremes, in which the costs of contracting and renegotiation can take intermediate values and the contracting parties can themselves influence these costs. The context for our analysis is the canonical problem of inducing efficient relation-specific investment and efficient ex post trade. Among our principle results are: (i) The efficiency and complexity of the initial contract are decreasing in the cost to create a contract. Hence, the best mechanism design contracts can be too costly to write. (ii) When parties use the simpler contract forms, they require renegotiation to capture ex post surplus and to create efficient investment incentives. In some cases, parties want low renegotiation costs. More interesting is that, in other cases, parties have a strict preference for moderate renegotiation costs. (iii) The effect of Contract Law on contract form is significant but has been overlooked. In particular, the law's interpretive rules raise the cost of enforcing complex contracts, and thus induce parties to use simple contracts. Worse, the law also lowers renegotiation costs, which further undermines complex contracts and is also inappropriate for some of the simpler contracts.
    • Patent Oppositions

      Levin, Jonathan; Levin, Richard (2002-08-01)
      In recent years, patent protection has extended into new areas, giving rise to serious concern about the lack of clear guidelines for patentability. We analyze the effect of introducing a patent opposition process that would allow patent validity to be challenged directly after a patent is granted. In many cases, such a system would avoid costly litigation at a later date. In other cases, the opposition process would increase the cost of conflict resolution, but would also reward holders of valid patents and limit the rewards to invalid patents. Our analysis suggests significant positive welfare gains from the introduction of a patent opposition process.
    • Bayesian Juries and The Limits to Deterrence

      Friedman, Ezra; Wickelgren, Abraham (2002-11-22)
      We consider a model of crime with rational Bayesian Jurors. We find that if jurors are not perfectly informed, even when there is no limit to the size of the punishment that can be imposed, it is not possible to deter all crime. There is a finite lower bound on the crime rate which results from the difficulties in achieving a conviction with imperfect evidence and very low crime rates. Crime can not be reduced below this rate by increasing the penalty, but the lower bound can be decreased by improving the quality of evidence presented to jurors, or by increasing the threshold of evidence necessary for prosecution.
    • The Logic of Reciprocity: Trust, Collective Action, and Law

      Kahan, Dan (2002-12-11)
      The Logic of Collective Action has for decades supplied the logic of public policy analysis. In this pioneering application of public choice theory, Mancur Olson ele gantly punctured the premise -- shared by a diverse variety of political theories -- that individuals can be expected to act consistently with the interest of the groups to which they belong. Absent externally imposed incentives, wealth-maximizing individuals, he argued, will rarely find it in their interest to contribute to goods that benefit the group as a whole, but rather will "free ride" on the contributions that other group members make. As a result, too few individuals will contribute sufficiently, and the well-being of the group will suffer. These are the assumptions that dominate public policy analysis and ultimately public policy across a host of regulatory domains -- from tax collection to environmental conservation, from street-level policing to policing of the internet.
    • The Theory of Value Dilemma: A Critique of the Economic Analysis of Criminal Law

      Kahan, Dan (2002-12-11)
      Criminal law can justly lay claim to being the native domain of law and economics. From Bentham to Becker, no area of law has been more brightly illuminated by the radiance of economic logic. Not coincidentally, in no other area of the law has the conflict between economics and ordinary moral sensibilities been perceived to be so sharp. When we are deciding how to apportion punishment, our instinct is to look backwards: wrongdoers should be condemned in proportion to the reprehensibility of their acts. I'll call the position that punishment should flow directly from these intuitions intrinsic value retributivism. Economics, in contrast, uses the forward-looking idiom of deterrence: punishment is justified if and to the extent that it produces a desired state of affairs; if the optimal degree of punishment so derived is out synch with intuitions about the reprehensibility of a particular crime, so much the worse for those intuitions. My goal in this essay is to demonstrate that economic analysis lacks the conceptual resources needed to criticize intrinsic value retributivism in this fashion. The economic theory necessarily presupposes some theory of value that tells us what states of affairs we are trying to maximize through punishment. To construct that theory, the members of a community must consult their shared intuitions. Once a theory of value so derived is plugged into deterrence theory, however, the results won't differ in any material respect from the ones the law would produce if informed explicitly by intrinsic value retributivism. This claim, which I'll call the theory of value dilemma, can be reduced to three sub-claims. The first is that the economic analysis of criminal law depends on an externally specified theory of value; without some account of what state of affairs the law is trying to maximize, the consequentialist logic of deterrence can't get off the ground. Second, this theory of value is essentially political; that is, there's nothing internal to economic approach that justifies discounting the valuations implicit in the decisions of a democratic political community's legal institutions, and hence nothing internal to economics that forecloses political advocacy of any particular theory of value. And the third and final sub-claim is that these politically derived evaluations will, as a practical and conceptual matter, always dominate the distinctive normative components of the economic theory of deterrence. I'll discuss each of these points in turn.
    • Path Dependence in the Law: The Course and Pattern of Legal Change in a Common Law System

      Hathaway, Oona (2003-03-01)
      Part I of this Article provides an overview of path dependence theory. It outlines the theory and briefly describes three separate strands of the theory: increasing returns path dependence, evolutionary path dependence, and sequencing path dependence, which are rooted in the economics, biological, and rational choice theory literatures, respectively. Although each of these strands has specific and unique characteristics, they are linked by a central insight: In each, an outcome or decision is shaped in specific and systematic ways by the path leading to it. Each of these strands of path dependence in turn has important implications for the course and pattern of change in the common law system. Accordingly, Part II applies path dependence theory to the common law. At the core of the common law system is the requirement that courts adhere to the body of principles and rules of action that derive their authority "solely from usages and customs of immemorial antiquity, or from the judgments and decrees of the courts recognizing, affirming, and enforcing such usages and customs." Under the doctrine of stare decisis, higher courts' previous decisions are controlling, courts give their own decisions significant weight, and courts look to non-binding decisions for persuasive precedent. Consequently, although there is some flexibility in the system, precedent remains central to legal deliberation. The doctrine of stare decisis thus creates an explicitly path-dependent process. Later decisions rely on, and are constrained by, earlier decisions. More important, the way in which history shapes legal outcomes corresponds to the three-fold division introduced in Part I. Because each legal decision increases the probability that the next will take a particular form, the common law exhibits increasing returns path dependence. Because the law changes through a process of punctuated yet historically constrained evolution, the common law exhibits evolutionary path dependence. And because the legal process involves sequential decisionmaking in a process marked by competing alternatives and multiple actors, the common law exhibits sequencing path dependence. Therefore, just as biological and social processes are constrained by history, the law is firmly guided by the heavy hand of the past. Finally, Part III turns from the descriptive to the normative. It analyzes the implications of path dependence theory for the doctrine of stare decisis. Path dependence theory reveals that significant costs may arise out of the reliance on precedent in a common law system. The Article concludes with the claim that, all other things being equal, where the costs of path dependence are expected to be especially significant, courts should consider relaxing the doctrine of stare decisis. This prescription not only supports modifying existing practices of reliance upon precedent, but also provides a theoretical basis for some existing distinctions in the degree that judges rely on certain categories of precedent.
    • Simultaneous and Sequential Anticommons

      Parisi, Francesco; Schulz, Norbert; Depoorter, Ben (2003-03-20)
      This paper defines a framework for anticommons analysis based on the fragmentation of property rights. In differentiating between sequential and simultaneous cases of property fragmentation, we describe and assess the equilibria obtained under each scenario. Our model reveals how the private incentives of excluders do not capture the external effects of their decisions. Moreover, our model suggests that the result of underutilization of joint property increases monotonically in both (a) the extent of fragmentation; and (b) the foregone synergies and complementarities between the property fragments. Within this context, we can therefore explore important implications for possible institutional responses to a range of issues raised by the concept of property fragmentation.