Authors:Guerra A; Parisi F. Pages: 657 - 671 Abstract: AbstractMuch of the conventional wisdom of evidence law rests on the premise that the amount of evidence available in any given case is exogenously determined. With the advent of evidence technology (e.g. dashcams, black-box technology, digital data storage, surveillance cameras), the availability of evidence is substantially controlled by individuals. In this article, we show that evidence rules play an important role in determining individuals’ decisions to invest in private evidence. We compare the evidence rules adopted in the USA and Europe and analyze their relative impact on the voluntary adoption of evidence technology. We find that by making private evidence not discoverable, more rather than less evidence would be made available to courts. PubDate: Mon, 16 May 2022 00:00:00 GMT DOI: 10.1093/jla/laac002 Issue No:Vol. 13, No. 1 (2022)
Authors:Spamann H. Pages: 672 - 734 Abstract: AbstractThis article argues that the key mechanisms protecting portfolio investors in public corporate securities are indirect. They do not rely on actions by the investors or by any private actor charged with looking after investors’ interests. Rather, they are provided by the ecosystem that investors (are legally forced to) inhabit, as a byproduct of the self-interested, mutually and legally constrained behavior of third parties without a mandate to help the investors such as speculators, activists, and plaintiff lawyers. This elucidates key rules, resolves the mandatory versus enabling tension in corporate/securities law, and exposes the current system’s fragile reliance on trading. PubDate: Thu, 19 May 2022 00:00:00 GMT DOI: 10.1093/jla/laac003 Issue No:Vol. 13, No. 1 (2022)
Authors:Yarkoni B; Shalem R, Hannes S. Pages: 1 - 42 Abstract: AbstractWe present a market-based compensation approach to antitrust litigation and other cases of price overcharges. Instead of lump-sum compensation, paid either directly or through coupons, defendants are required to lower their prices for a certain designated period, i.e. price-cap compensation (PCC). We show why previous criticism of PCC was misguided. And, in sharp contrast to the common view in the literature, implementing PCC may have many substantive and procedural advantages. Importantly, although PCC is implemented vis-à-vis direct purchasers only, it reconciles the U.S. and European Union legal approaches and solves the challenge of passed-on damages to indirect purchasers. PubDate: Tue, 23 Mar 2021 00:00:00 GMT DOI: 10.1093/jla/laaa009 Issue No:Vol. 13, No. 1 (2021)
Authors:Luguri J; Strahilevitz L. Pages: 43 - 109 Abstract: AbstractDark patterns are user interfaces whose designers knowingly confuse users, make it difficult for users to express their actual preferences, or manipulate users into taking certain actions. They typically exploit cognitive biases and prompt online consumers to purchase goods and services that they do not want or to reveal personal information they would prefer not to disclose. This article provides the first public evidence of the power of dark patterns. It discusses the results of the authors’ two large-scale experiments in which representative samples of American consumers were exposed to dark patterns. In the first study, users exposed to mild dark patterns were more than twice as likely to sign up for a dubious service as those assigned to the control group, and users in the aggressive dark pattern condition were almost four times as likely to subscribe. Moreover, whereas aggressive dark patterns generated a powerful backlash among consumers, mild dark patterns did not. Less educated subjects were significantly more susceptible to mild dark patterns than their well-educated counterparts. The second study identified the dark patterns that seem most likely to nudge consumers into making decisions that they are likely to regret or misunderstand. Hidden information, trick question, and obstruction strategies were particularly likely to manipulate consumers successfully. Other strategies employing loaded language or generating bandwagon effects worked moderately well, while still others such as “must act now” messages did not make consumers more likely to purchase a costly service. Our second study also replicated a striking result in the first experiment, which is that where dark patterns were employed the cost of the service offered to consumers became immaterial. Decision architecture, not price, drove consumer purchasing decisions. The article concludes by examining legal frameworks for addressing dark patterns. Many dark patterns appear to violate federal and state laws restricting the use of unfair and deceptive practices in trade. Moreover, in those instances where consumers enter into contracts after being exposed to dark patterns, their consent could be deemed voidable under contract law principles. The article also proposes that dark pattern audits become part of the Federal Trade Commission (FTC)’s consent decree process. Dark patterns are presumably proliferating because firms’ proprietary A-B testing has revealed them to be profit maximizing. We show how similar A-B testing can be used to identify those dark patterns that are so manipulative that they ought to be deemed unlawful. PubDate: Tue, 23 Mar 2021 00:00:00 GMT DOI: 10.1093/jla/laaa006 Issue No:Vol. 13, No. 1 (2021)
Authors:Spamann H; Klöhn L, Jamin C, et al. Pages: 110 - 126 Abstract: AbstractIn our lab, 299 real judges from seven major jurisdictions (Argentina, Brazil, China, France, Germany, India, and USA) spend up to fifty-five minutes to judge an international criminal appeals case and determine the appropriate prison sentence. The lab computer (i) logs their use of the documents (briefs, statement of facts, trial judgment, statute, precedent) and (ii) randomly assigns each judge (a) a horizontal precedent disfavoring, favoring, or strongly favoring defendant, (b) a sympathetic or an unsympathetic defendant, and (c) a short, medium, or long sentence anchor. Document use and written reasons differ between countries but not between common and civil law. Precedent effect is barely detectable and estimated to be less, and bounded to be not much greater than, that of legally irrelevant defendant attributes and sentence anchors. PubDate: Tue, 23 Mar 2021 00:00:00 GMT DOI: 10.1093/jla/laaa008 Issue No:Vol. 13, No. 1 (2021)
Authors:Sykes A. Pages: 127 - 171 Abstract: Abstract“Forced technology transfer” is a central issue in the ongoing U.S.–China trade row. The phrase encompasses a number of different practices, but the most significant according to various commentators involve measures that require foreign investors in China to partner with domestic entities as a condition of making an investment, either by forming a joint venture or affording Chinese investors a controlling equity stake. These “corporate structure requirements” empower prospective Chinese partners to bargain for technology transfer as a condition of forming a new venture or otherwise enable them to learn the details of foreign technology through participation in the business enterprise. Foreign investors are free to reject such requirements and forego the associated investment opportunities, and in this sense any technology transfer pursuant to China’s requirements is “consensual.” For ease of reference, this essay refers to these corporate structure requirements as CSR. The analysis to follow examines the economics of CSR from both the national and global welfare perspectives. It indicates how CSR may undercut the national welfare of the USA even if it is profitable for U.S. investors. The global welfare implications of CSR, however, are much less clear, which offers an explanation for the absence of any constraints on CSR in typical trade agreements. A clear role for restrictions on CSR does emerge, however, in investment agreements that seek to eliminate investment protectionism by requiring “pre-establishment national treatment” for foreign investors. This analysis has immediate policy implications for the ongoing trade dispute with China. PubDate: Tue, 23 Mar 2021 00:00:00 GMT DOI: 10.1093/jla/laaa007 Issue No:Vol. 13, No. 1 (2021)
Authors:Hansmann H; Thomsen S. Pages: 172 - 230 Abstract: AbstractThe burgeoning literature on corporate governance, both in economics and in law, has focused heavily on the agency costs of delegated management. It is therefore striking to encounter a large number of well-established and highly successful companies that have long been under the complete control of a self-appointing board of directors whose compensation is divorced from the profitability of the company and who cannot be removed or replaced by anyone except themselves.The companies in question are those controlled by “industrial foundations,” which are nonprofit entities that possess a controlling interest in an otherwise conventional business corporation. Although common throughout Northern Europe, industrial foundations are particularly numerous in Denmark, where they control a quarter of the country’s 100 largest corporations. We work with a data set of 110 foundation-owned Danish firms to explore whether, and how, the governance structure of industrial foundations helps explain the strong performance of the firms they control. Given the absence of substantial material incentives, we concentrate on governance structures. We find a strong and robust relationship between the structure of foundation governance and firm performance. These results reinforce the view that, with the proper governance structure, pure fiduciaries can perform more efficiently than conventional economic models would predict. More specifically, these results underline the potential importance of the legislation that, in 2018, removed the long-standing barrier to forming industrial foundations in the USA. PubDate: Tue, 23 Mar 2021 00:00:00 GMT DOI: 10.1093/jla/laaa005 Issue No:Vol. 13, No. 1 (2021)
Authors:Chang Y; Garoupa N, Wells M. Pages: 231 - 282 Abstract: AbstractTraditional comparative private law scholars have a firm grasp of laws in several countries, but rarely of those in more than one hundred countries. Quantitative comparative private law scholars have placed dozens of countries into a legal family genealogy, but not based on a systematic understanding of legal substance around the world. Using a unique, hand-coded data set on 108 property doctrines (transformed into 170 binary variables) in 129 jurisdictions, we ran supervised and unsupervised machine-learning algorithms. Some of our findings confirm the conventional wisdom: French and German property laws are influential; mixed jurisdictions like South Africa and Scotland are one of a kind; common law jurisdictions form a group of their own; and a handful of formerly socialist countries, led by Russia, cluster together. Unlike the prior literature, however, we do not find that East Asian jurisdictions warrant a category of their own; but belong to distant groups. Spain and many Latin American countries form a separate group. Rather than finding a clear-cut common versus civil law division, we observe that the France-inspired group is one supercluster, separate from other jurisdictions. PubDate: Thu, 29 Apr 2021 00:00:00 GMT DOI: 10.1093/jla/laaa004 Issue No:Vol. 13, No. 1 (2021)
Authors:Engel C; Grgić-Hlača N. Pages: 284 - 340 Abstract: AbstractThe Wisconsin Supreme Court allows machine advice in the courtroom only if accompanied by a series of warnings. We test 878 US lay participants with jury experience on fifty past cases where we know ground truth. The warnings affect their estimates of the likelihood of recidivism and their confidence, but not their decision whether to grant bail. Participants do not get better at identifying defendants who recidivated during the next two years. Results are essentially the same if participants are warned in easily accessible language, and if they are additionally informed about the low accuracy of machine predictions. The decision to grant bail is also unaffected by the warnings mandated by the Supreme Court if participants do not first decide without knowing the machine prediction. Oversampling cases where defendants committed violent crime does not change results either, whether coupled with machine predictions for general or for violent crime. Giving participants feedback and incentivizing them for finding ground truth has a small, weakly significant effect. The effect becomes significant at conventional levels when additionally using strong graphical warnings. Then participants are less likely to follow the advice. But the effect is counterproductive: they follow the advice less if it actually is closer to ground truth. PubDate: Tue, 24 Aug 2021 00:00:00 GMT DOI: 10.1093/jla/laab001 Issue No:Vol. 13, No. 1 (2021)
Authors:Kahan M; McKenzie T. Pages: 341 - 379 Abstract: AbstractWe examine related case rules, which are local rules adopted by federal district courts to determine whether a newly filed civil action will be assigned to a judge presiding over a previously filed similar case or a randomly chosen judge. Districts have adopted divergent approaches to the definition of “relatedness” as well as to the process for determining whether a case satisfies the definition. We analyze how these design choices affect the ability of parties to strategically manipulate case assignments to gain an advantage in litigation. We also propose suggestions for the optimal design of the assignment rules for related cases. PubDate: Wed, 22 Sep 2021 00:00:00 GMT DOI: 10.1093/jla/laab007 Issue No:Vol. 13, No. 1 (2021)
Authors:Spamann H; Klöhn L, Jamin C, et al. Pages: 380 - 380 Abstract: In the originally published version of this manuscript, there were several errors which have been corrected online. PubDate: Wed, 06 Oct 2021 00:00:00 GMT DOI: 10.1093/jla/laab006 Issue No:Vol. 13, No. 1 (2021)
Authors:Hemel D; Weisbach D. Pages: 381 - 438 Abstract: AbstractThis article presents a measure of the efficiency consequences of changes to tax policies that inform a wide range of tax law debates. Building upon recent extensions to the “elasticity of taxable income” concept, we clarify the relationship among revenue effects, administrative costs, and compliance costs. The resulting measure—the behavioral elasticity of tax revenue (BETR)—captures the change in total resources resulting from marginal changes in tax rates, the tax base, or tax enforcement. We illustrate the BETR’s utility through a series of case studies. We also show how the BETR can help policy makers select more efficient redistributive mechanisms. PubDate: Tue, 09 Nov 2021 00:00:00 GMT DOI: 10.1093/jla/laab003 Issue No:Vol. 13, No. 1 (2021)
Authors:Bradley C. Pages: 439 - 501 Abstract: AbstractA chief reason that the President is insufficiently constrained when exercising statutorily-delegated power, it is claimed, is the Supreme Court’s disallowance of legislative vetoes in its decision in INS v. Chadha, a claim that intensified during the Trump administration. This article challenges this account, arguing that the availability of the legislative veto was less important before Chadha to congressional-executive relations than legal scholars commonly assume, and that, to the extent that the legislative veto was (or would have become) important for checking some exercises of statutorily-delegated authority, Congress has developed a host of effective workarounds in the years since Chadha. PubDate: Tue, 09 Nov 2021 00:00:00 GMT DOI: 10.1093/jla/laab008 Issue No:Vol. 13, No. 1 (2021)
Authors:Gould J; Shepsle K, Stephenson M. Pages: 502 - 557 Abstract: AbstractThis article proposes that the U.S. Senate adopt a “popular-majoritarian cloture rule,” under which a motion to close debate and proceed to a final vote would carry if but only if supported by a majority of Senators who collectively represent a larger share of the population than those Senators in opposition. This rule, which would be a constitutional exercise of the Senate’s power to set the rules of its proceedings, would make the body more democratic and more functional, and would be preferable both to the current filibuster rule and to simple majority rule. PubDate: Thu, 18 Nov 2021 00:00:00 GMT DOI: 10.1093/jla/laab005 Issue No:Vol. 13, No. 1 (2021)
Authors:Cheng E; Edelman P, Fitzpatrick B. Pages: 558 - 594 Abstract: AbstractAs consolidated multidistrict litigation has come to dominate the federal civil docket, the problem of how to divide attorney fees among participating firms has become the source of frequent and protracted litigation. For example, in the National Football League (NFL) Concussion Litigation, the judge awarded the plaintiff attorneys over $100 million in fees, but the division of those fees among the twenty-six firms involved sparked two additional years of litigation. We explore solutions to this fee division problem, drawing insights from the economics, game theory, and industrial organization literatures. Ultimately, we propose a novel division method based on peer reports. Participating firms assess the relative contribution of other firms to the litigation, and then optimization or Bayesian techniques arrive at a consensus or compromise fee allocation. Our methods are intuitively easy to understand, enable broad participation, and are resistant to collusion or other strategic behavior, making them likely to be accepted by the firms involved. We thus provide courts with an important mediation tool or decision rule for these fee division disputes. PubDate: Tue, 30 Nov 2021 00:00:00 GMT DOI: 10.1093/jla/laab002 Issue No:Vol. 13, No. 1 (2021)
Authors:Fischman J. Pages: 595 - 656 Abstract: AbstractBecause judges are expected to decide cases through the impartial application of existing law, they are often reluctant to admit that they must make law in hard cases. Many judges claim that such hard cases are rare, constituting roughly 10 percent of cases. In stark contrast, economic models of the selection of disputes for litigation predict that easy cases will settle, so that only hard cases would remain in trial and appellate courts. Empirical indicators, such as dissent rates or voting differences between Democratic and Republican appointees, have yielded muddled conclusions about the proportion of easy and hard cases in appellate courts. In fact, none of these crude statistics relate directly to the proportion of easy cases. This article develops a new approach for empirically analyzing the proportion of easy cases. Although the easiness and hardness of cases are subjective, it is possible to estimate feasible combinations of the proportion of hard cases and clear errors. This approach relies only on the basic premise that reasonable judges should not disagree in easy cases. The article then illustrates this approach using two datasets of appeals. An analysis of asylum appeals in the 9th Circuit finds widespread disagreement, implying high proportions of hard cases, clear errors, or both. By contrast, voting data from labor and environmental cases in the D.C. Circuit is consistent with the claim that 90 percent of cases are easy and 1 percent of decisions are clear errors. PubDate: Mon, 13 Dec 2021 00:00:00 GMT DOI: 10.1093/jla/laaa010 Issue No:Vol. 13, No. 1 (2021)