One of the most important and disputed questions within the fields of international relations and conflict studies concerns the issue of mediator impartiality. Should mediators be biased—supportive of one but not both of the main disputants—or should mediators always be impartial? This paper contributes to this debate by studying the effectiveness of mediation with regard to the role of mediator bias in a game-theoretic model of cheap talk. This study shows that the institutional design of a mediation process is affected by two factors: the relative degree of conflict and the incentives to misrepresent private information. We find that a necessary (but not always sufficient) condition for the success of a mediation process is a sufficiently low likelihood of a misrepresentation problem. If in addition, the relative degree of conflict is low enough, mediation is effective, and the institutional design of a mediation process is the same regardless of the bias. Otherwise, the design will be quite different depending on the direction of the bias. (JEL D63, D74, D82)
{"title":"Biased Mediators in Conflict Resolution","authors":"Andrés Salamanca","doi":"10.1093/aler/ahad014","DOIUrl":"https://doi.org/10.1093/aler/ahad014","url":null,"abstract":"One of the most important and disputed questions within the fields of international relations and conflict studies concerns the issue of mediator impartiality. Should mediators be biased—supportive of one but not both of the main disputants—or should mediators always be impartial? This paper contributes to this debate by studying the effectiveness of mediation with regard to the role of mediator bias in a game-theoretic model of cheap talk. This study shows that the institutional design of a mediation process is affected by two factors: the relative degree of conflict and the incentives to misrepresent private information. We find that a necessary (but not always sufficient) condition for the success of a mediation process is a sufficiently low likelihood of a misrepresentation problem. If in addition, the relative degree of conflict is low enough, mediation is effective, and the institutional design of a mediation process is the same regardless of the bias. Otherwise, the design will be quite different depending on the direction of the bias. (JEL D63, D74, D82)","PeriodicalId":46133,"journal":{"name":"American Law and Economics Review","volume":null,"pages":null},"PeriodicalIF":1.5,"publicationDate":"2024-09-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142266300","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
It has become common to view credit as problematic for present-biased consumers, who are tempted to incur too much debt because of its deferred costs. But while this view is generally valid when debt is used to finance current consumption, the picture becomes much more nuanced when credit is used to fund the purchase of durable goods—such as houses, cars, and education—which is the most common use of consumer credit. When bundled with the purchase of a durable good, the deferred cost feature of credit can be a feature, not a bug. The reason is that durable goods provide deferred benefits that are also undervalued by present-biased consumers. Moreover, people often need to save in advance to finance the purchase of a durable good, and present-bias makes it difficult to save. As a result, people with present bias tend to underconsume durable goods. We show that the deferred costs of purchase debt can offset these barriers to buying durable goods and make the present-biased consumer better off both by tempting her to buy something that she should—but would not otherwise—buy and by making it easier to save up for the purchase. (JEL D90, K0, G51)
{"title":"Present Bias and Debt-Financed Durable Goods","authors":"Bar-Gill Bar-Gill, Andrew T Hayashi","doi":"10.1093/aler/ahae005","DOIUrl":"https://doi.org/10.1093/aler/ahae005","url":null,"abstract":"It has become common to view credit as problematic for present-biased consumers, who are tempted to incur too much debt because of its deferred costs. But while this view is generally valid when debt is used to finance current consumption, the picture becomes much more nuanced when credit is used to fund the purchase of durable goods—such as houses, cars, and education—which is the most common use of consumer credit. When bundled with the purchase of a durable good, the deferred cost feature of credit can be a feature, not a bug. The reason is that durable goods provide deferred benefits that are also undervalued by present-biased consumers. Moreover, people often need to save in advance to finance the purchase of a durable good, and present-bias makes it difficult to save. As a result, people with present bias tend to underconsume durable goods. We show that the deferred costs of purchase debt can offset these barriers to buying durable goods and make the present-biased consumer better off both by tempting her to buy something that she should—but would not otherwise—buy and by making it easier to save up for the purchase. (JEL D90, K0, G51)","PeriodicalId":46133,"journal":{"name":"American Law and Economics Review","volume":null,"pages":null},"PeriodicalIF":1.5,"publicationDate":"2024-09-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142203362","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The myriad uncertainties common to the process of adjudication—concerning evidence that opposing parties will present, legal issues that will become relevant, illness of witnesses, and the like—lead to two social problems. First, when unanticipated events occur, the information that parties will be able to provide to courts may be inadequate. And second, preparation effort invested by parties may be wasted; whereas parties will tend to prepare for numerous possible events in adjudication, many will not come to pass and thus much effort will be for nought. Both of these problems are addressed by the granting of continuances: inability to present evidence for want of time will be directly remedied by the giving of continuances; and wasted preparation effort will be reduced because the ability to obtain continuances when uncertain events occur will lessen the need to prepare for them. But the use of continuances involves various costs of delay, meaning that the decision to grant continuances should be guided by an economic calculus. That calculus is developed in the theory presented in this article and the actual use of continuances is discussed. (JEL D8, K4, K41)
{"title":"Continuances and Uncertainty in the Course of Adjudication","authors":"Steven Shavell","doi":"10.1093/aler/ahad005","DOIUrl":"https://doi.org/10.1093/aler/ahad005","url":null,"abstract":"The myriad uncertainties common to the process of adjudication—concerning evidence that opposing parties will present, legal issues that will become relevant, illness of witnesses, and the like—lead to two social problems. First, when unanticipated events occur, the information that parties will be able to provide to courts may be inadequate. And second, preparation effort invested by parties may be wasted; whereas parties will tend to prepare for numerous possible events in adjudication, many will not come to pass and thus much effort will be for nought. Both of these problems are addressed by the granting of continuances: inability to present evidence for want of time will be directly remedied by the giving of continuances; and wasted preparation effort will be reduced because the ability to obtain continuances when uncertain events occur will lessen the need to prepare for them. But the use of continuances involves various costs of delay, meaning that the decision to grant continuances should be guided by an economic calculus. That calculus is developed in the theory presented in this article and the actual use of continuances is discussed. (JEL D8, K4, K41)","PeriodicalId":46133,"journal":{"name":"American Law and Economics Review","volume":null,"pages":null},"PeriodicalIF":1.5,"publicationDate":"2024-08-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141946821","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Discovery is the formal process of exchanging information under the supervision of the courts. Since managing discovery is costly, courts have implemented case management techniques to reduce motion practice in discovery. This study examines whether case management techniques can reduce the likelihood of a discovery dispute. We attempt to untangle the impact of specific judges from the use of a particular case management technique. We focus on the use of informal discovery conferences (IDCs) in which parties meet with the judge before filing a motion to compel. The problem with simply testing whether IDCs reduce the number of discovery motions is that the use of an IDC is likely endogenous. Our solution to this endogeneity is to use the random assignment of judges. Since some judges have a higher propensity to use IDCs and some courts have begun requiring them, we have two sources of policy variation. Using this estimation strategy, we find that IDCs reduce the number and presence of discovery motions. (JEL K13, K40, K41)
{"title":"More Talk, Less Conflict: Evidence from Requiring Informal Discovery Conferences","authors":"Eric Helland, Minjae Yun","doi":"10.1093/aler/ahad009","DOIUrl":"https://doi.org/10.1093/aler/ahad009","url":null,"abstract":"Discovery is the formal process of exchanging information under the supervision of the courts. Since managing discovery is costly, courts have implemented case management techniques to reduce motion practice in discovery. This study examines whether case management techniques can reduce the likelihood of a discovery dispute. We attempt to untangle the impact of specific judges from the use of a particular case management technique. We focus on the use of informal discovery conferences (IDCs) in which parties meet with the judge before filing a motion to compel. The problem with simply testing whether IDCs reduce the number of discovery motions is that the use of an IDC is likely endogenous. Our solution to this endogeneity is to use the random assignment of judges. Since some judges have a higher propensity to use IDCs and some courts have begun requiring them, we have two sources of policy variation. Using this estimation strategy, we find that IDCs reduce the number and presence of discovery motions. (JEL K13, K40, K41)","PeriodicalId":46133,"journal":{"name":"American Law and Economics Review","volume":null,"pages":null},"PeriodicalIF":1.5,"publicationDate":"2024-01-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139482853","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Oliver Williamson has coined the term “fundamental transformation.” It captures the following situation: before they strike a deal, buyers and sellers are protected by competition. Yet, thereafter, they find themselves in a bilateral monopoly. With common knowledge of standard preferences, both sides would conclude the contract regardless if its expected value exceeds their outside options. We run an experiment to test whether additional behavioral concerns deter mutually beneficial trade. We test four concerns: If the risk materializes, another individual makes a windfall profit; she does so by intentionally exploiting another individual; the exploited individual may be her assigned partner; the individual that is let down is her contractual partner, and hence has voluntarily exposed herself to this risk. Behavioral effects are heterogeneous. About a quarter of participants from a standard student subject pool exhibit the hypothesized additional deterrent effect. This fraction is bigger than a third if participants interact with a random partner from somewhere in the world.
{"title":"Does the Fundamental Transformation Deter Trade? An Experiment","authors":"Christoph Engel, Eric Helland","doi":"10.1093/aler/ahad007","DOIUrl":"https://doi.org/10.1093/aler/ahad007","url":null,"abstract":"Oliver Williamson has coined the term “fundamental transformation.” It captures the following situation: before they strike a deal, buyers and sellers are protected by competition. Yet, thereafter, they find themselves in a bilateral monopoly. With common knowledge of standard preferences, both sides would conclude the contract regardless if its expected value exceeds their outside options. We run an experiment to test whether additional behavioral concerns deter mutually beneficial trade. We test four concerns: If the risk materializes, another individual makes a windfall profit; she does so by intentionally exploiting another individual; the exploited individual may be her assigned partner; the individual that is let down is her contractual partner, and hence has voluntarily exposed herself to this risk. Behavioral effects are heterogeneous. About a quarter of participants from a standard student subject pool exhibit the hypothesized additional deterrent effect. This fraction is bigger than a third if participants interact with a random partner from somewhere in the world.","PeriodicalId":46133,"journal":{"name":"American Law and Economics Review","volume":null,"pages":null},"PeriodicalIF":1.5,"publicationDate":"2024-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139407974","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, we study a labor market setup in which workers exhibit relative remuneration concerns with respect to their peers. We first characterize the optimal labor contract offered by the firm and provide necessary and sufficient conditions for the desirability of incorporating pay-secrecy clauses in such a contract. We then demonstrate that, in contrast to conventional wisdom viewing wage-secrecy arrangements as detrimental for workers, the latter may, in fact, gain from the lack of pay transparency.
{"title":"A Case for Pay Secrecy","authors":"Tomer Blumkin, David Lagziel, Yoram Margalioth","doi":"10.1093/aler/ahad004","DOIUrl":"https://doi.org/10.1093/aler/ahad004","url":null,"abstract":"In this paper, we study a labor market setup in which workers exhibit relative remuneration concerns with respect to their peers. We first characterize the optimal labor contract offered by the firm and provide necessary and sufficient conditions for the desirability of incorporating pay-secrecy clauses in such a contract. We then demonstrate that, in contrast to conventional wisdom viewing wage-secrecy arrangements as detrimental for workers, the latter may, in fact, gain from the lack of pay transparency.","PeriodicalId":46133,"journal":{"name":"American Law and Economics Review","volume":null,"pages":null},"PeriodicalIF":1.5,"publicationDate":"2024-01-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139373089","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper shows that the provision of consumer rights can induce unintended distributional effects and may, under specific circumstances, even decrease welfare when some consumers are unaware of these rights. We find that consumers who are uninformed about a mandated warranty may demand excessively safe products when the share of informed consumers is high. In other circumstances, uninformed consumers buy the efficient or an inefficiently unsafe products like informed consumers, but the former cross-subsidize the latter via firms’ pricing. Concerning the salient policy option of improving information about consumer rights, we find that increasing the share of informed consumers may raise the risk of inefficiency.
{"title":"Imperfect Information About Consumer Rights: Implications for Efficiency and Distribution","authors":"Florian Baumann, Tim Friehe, Tobias Wenzel","doi":"10.1093/aler/ahad002","DOIUrl":"https://doi.org/10.1093/aler/ahad002","url":null,"abstract":"This paper shows that the provision of consumer rights can induce unintended distributional effects and may, under specific circumstances, even decrease welfare when some consumers are unaware of these rights. We find that consumers who are uninformed about a mandated warranty may demand excessively safe products when the share of informed consumers is high. In other circumstances, uninformed consumers buy the efficient or an inefficiently unsafe products like informed consumers, but the former cross-subsidize the latter via firms’ pricing. Concerning the salient policy option of improving information about consumer rights, we find that increasing the share of informed consumers may raise the risk of inefficiency.","PeriodicalId":46133,"journal":{"name":"American Law and Economics Review","volume":null,"pages":null},"PeriodicalIF":1.5,"publicationDate":"2024-01-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139373437","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Legal procedures used to determine liability trade-off type-1 errors (e.g., false convictions) against type-2 errors (e.g., false acquittals). After noting that people’s relative preferences for type-1 errors (compared to type-2 errors) appear to be negatively correlated with technological advancements, we study how the accuracy of evidence collection methods may affect the trade-off between these two errors. Counter-intuitively, we find that under some conditions, greater accuracy may result in a higher probability of type-1 error (or type-2 error) maximizing deterrence. Then, assuming both errors are decreasing in accuracy, we characterize the type-1 error that emerges under electoral pressures (when the median voter’s preferences are implemented): convictions occur more often than is socially optimal but less often than is necessary to maximize deterrence. Moreover, as the harm from crime increases, the median voter becomes less tolerant of type-1 errors as the legal system’s accuracy increases. We also show that, because the median voter is less averse toward type-1 errors than the average citizen, an increase in accuracy may reduce welfare.
{"title":"Accuracy and Preferences for Legal Error","authors":"Murat C Mungan, Marie Obidzinski, Yves Oytana","doi":"10.1093/aler/ahad006","DOIUrl":"https://doi.org/10.1093/aler/ahad006","url":null,"abstract":"Legal procedures used to determine liability trade-off type-1 errors (e.g., false convictions) against type-2 errors (e.g., false acquittals). After noting that people’s relative preferences for type-1 errors (compared to type-2 errors) appear to be negatively correlated with technological advancements, we study how the accuracy of evidence collection methods may affect the trade-off between these two errors. Counter-intuitively, we find that under some conditions, greater accuracy may result in a higher probability of type-1 error (or type-2 error) maximizing deterrence. Then, assuming both errors are decreasing in accuracy, we characterize the type-1 error that emerges under electoral pressures (when the median voter’s preferences are implemented): convictions occur more often than is socially optimal but less often than is necessary to maximize deterrence. Moreover, as the harm from crime increases, the median voter becomes less tolerant of type-1 errors as the legal system’s accuracy increases. We also show that, because the median voter is less averse toward type-1 errors than the average citizen, an increase in accuracy may reduce welfare.","PeriodicalId":46133,"journal":{"name":"American Law and Economics Review","volume":null,"pages":null},"PeriodicalIF":1.5,"publicationDate":"2024-01-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139376280","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Correction to: On Economic Theories of Criminal Punishment: Pricing, Prevention, or Proportionality?","authors":"","doi":"10.1093/aler/ahad012","DOIUrl":"https://doi.org/10.1093/aler/ahad012","url":null,"abstract":"","PeriodicalId":46133,"journal":{"name":"American Law and Economics Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135111921","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Correction to: Do Taxes Affect Marriage? Lessons from History","authors":"","doi":"10.1093/aler/ahad011","DOIUrl":"https://doi.org/10.1093/aler/ahad011","url":null,"abstract":"","PeriodicalId":46133,"journal":{"name":"American Law and Economics Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135113653","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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