Journal Cover
Journal of Law, Economics, and Organization
Journal Prestige (SJR): 1.585
Citation Impact (citeScore): 1
Number of Followers: 49  
  Hybrid Journal Hybrid journal (It can contain Open Access articles)
ISSN (Print) 8756-6222 - ISSN (Online) 1465-7341
Published by Oxford University Press Homepage  [397 journals]
  • Distortion of Justice: How the Inability to Pay Bail Affects Case Outcomes
    • Authors: Stevenson M.
      Pages: 511 - 542
      Abstract: This article uses a natural experiment to analyze whether incarceration during the pretrial period affects case outcomes. In Philadelphia, defendants randomly receive bail magistrates who differ widely in their propensity to set bail at affordable levels. Using magistrate leniency as an instrument, I find that pretrial detention leads to a 13% increase in the likelihood of being convicted, an effect largely explained by an increase in guilty pleas among defendants who otherwise would have been acquitted or had their charges dropped. I find also that pretrial detention leads to a 42% increase in the length of the incarceration sentence and a 41% increase in the amount of nonbail court fees owed. This latter finding contributes to a growing literature on fines-and-fees in criminal justice, and suggests that the use of money bail contributes to a “poverty-trap”: those who are unable to pay bail wind up accruing more court debt.
      PubDate: Tue, 18 Sep 2018 00:00:00 GMT
      DOI: 10.1093/jleo/ewy019
      Issue No: Vol. 34, No. 4 (2018)
  • Appraising the “Merger Price” Appraisal Rule
    • Authors: Choi A; Talley E.
      Pages: 543 - 578
      Abstract: This paper develops an auction design framework to analyze various methods for assessing “fair value” in post-merger appraisal proceedings. Our inquiry spotlights an approach recently embraced by some courts benchmarking fair value against the merger price itself. We show that the merger price deference effectively nullifies the role that appraisal can potentially play in establishing a de facto reserve price for company auctions, thereby depressing both acquisition prices and target shareholders’ expected welfare relative to both the optimal appraisal policy and a variety of other valuation measures. We also examine conditions under which deference to the merger price may nonetheless be defensible on economic grounds. Our results have empirical implications for understanding appraisal, and they likewise help to inform doctrine by providing guidance to legal actors about when a sales process can be considered sufficiently “robust” to justify deal price deference. (JEL D44, D82, G34, K22)
      PubDate: Tue, 21 Aug 2018 00:00:00 GMT
      DOI: 10.1093/jleo/ewy016
      Issue No: Vol. 34, No. 4 (2018)
  • Termination Risk and Agency Problems: Evidence from the NBA
    • Authors: Cohen A; Levy N, Sasson R.
      Pages: 579 - 618
      Abstract: When agents with a significant risk of termination in the short term have discretion over project selection, they may have incentives to underinvest in projects whose results would be realized only in the long term, and owners may take this agency problem into account when deciding whether to grant those agents discretion in decision-making. Because NBA rookies who participate in games gain NBA experience that likely improves their long-term performance, decisions of NBA teams about whether to let rookies play provide a useful context for investigating this potential agency problem. We develop a model that identifies when owners will choose to leave coaches with discretion over rookie participation decisions and shows that, in the presence of such discretion, coaches facing a higher termination risk can be expected to use rookies less often. Testing our model using NBA data, we find evidence that is consistent with the predictions of our model (JEL D20, J44, K00, L83).
      PubDate: Tue, 04 Sep 2018 00:00:00 GMT
      DOI: 10.1093/jleo/ewy018
      Issue No: Vol. 34, No. 4 (2018)
  • Subrogation and the Theory of Insurance When Suits Can Be Brought for
           Losses Suffered
    • Authors: Polinsky A; Shavell S.
      Pages: 619 - 649
      Abstract: The theory of insurance is considered here when an insured individual may be able to sue another party for the losses that the insured suffered—and thus when an insured has a potential source of compensation in addition to insurance coverage. Insurance policies reflect this possibility through so-called subrogation provisions that give insurers the right to step into the shoes of insureds and to bring suits against injurers. In a basic case, the optimal subrogation provisions involve full retention by the insurer of the proceeds from a successful suit and the pursuit of all positive expected value suits. This eliminates litigation risks for insureds and results in lower premiums—financed by the litigation income of insurers, including from suits that insureds would not otherwise have brought. Moreover, optimal subrogation provisions are characterized in the presence of moral hazard, administrative costs, and non-monetary losses, and it is demonstrated that optimal provisions entail sharing litigation proceeds with insureds in the first two cases but not when losses are non-monetary. (JEL G22, K13, K41)
      PubDate: Fri, 21 Sep 2018 00:00:00 GMT
      DOI: 10.1093/jleo/ewy008
      Issue No: Vol. 34, No. 4 (2018)
  • Incomplete Contracts: An Empirical Approach
    • Authors: Sanga S.
      Pages: 650 - 679
      Abstract: The strategic ambiguity hypothesis posits that when some aspects of performance are observable but not verifiable, the optimal contract is deliberately incomplete. I test this result for the first time. Because a direct test is infeasible, I derive an equivalent result: incompleteness is optimal when some terms are legally void. I test this using executive contracts from S&P 500 firms. I find that firms pay severance in discretionary installments to induce their executives to comply with noncompete agreements—but only in California, where noncompetes are void. Outside California, noncompetes are valid and these same firms pay non-discretionary severance upfront. I conclude that firms use strategic ambiguity to circumvent legal constraints. (JEL D86, K12, J41)
      PubDate: Wed, 11 Jul 2018 00:00:00 GMT
      DOI: 10.1093/jleo/ewy012
      Issue No: Vol. 34, No. 4 (2018)
  • Acknowledgements
    • Pages: 680 - 681
      Abstract: The Editorial Board of the Journal of Law, Economics, and Organization acknowledges the assistance of:
      PubDate: Fri, 16 Nov 2018 00:00:00 GMT
      DOI: 10.1093/jleo/ewy022
      Issue No: Vol. 34, No. 4 (2018)
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