Law and Economics

Intellectual Property Article

The Host’s Dilemma: Strategic Forfeiture in Platform Markets for Informational Goods

Vol. 124 No. 8 Voluntary forfeiture of intellectual assets – often, exceptionally valuable assets – is surprisingly widespread in information technology markets. A simple economic rationale can account for these practices. By giving away access to core technologies, a platform holder commits against expropriating (and thereby induces) user investments that support platform value. To generate revenues that cover development and maintenance costs, the platform holder must regulate access to other goods and services within the total consumption bundle. The trade-off between forfeiting access (to induce adoption) and regulating access (to recover costs) anticipates the substantial convergence of open and closed innovation models.
Antitrust Article

Why (Ever) Define Markets?

Vol. 124 No. 2 Competition law is dominated by the market definition / market share paradigm, under which a relevant market is defined and pertinent market shares therein are examined in order to make inferences about market power. This Article advances the immodest claim that the market definition process is incoherent as a matter of basic economic principles and hence should be abandoned entirely.
Evidence Essay

The Distortionary Effect of Evidence on Primary Behavior

Vol. 124 No. 2 In this Essay, we analyze how evidentiary concerns dominate actor’s behavior. Our findings offer an important refinement to the conventional wisdom in law and economics literature, which assumes that legal rules can always be fashioned to achieve socially optimal outcomes. We show that evidentiary motivations will often lead actors to engage in socially suboptimal behavior when doing so is likely to increase their chances of prevailing in court.
Law and Economics Article

A Skeptical Attitude About Product Liability Is Justified: A Reply to Professors Goldberg and Zipursky

Response to The Easy Case for Products Liability Law: A Response to Professors Polinsky and Shavell, The Uneasy Case for Product Liability
Vol. 123 No. 8 In The Uneasy Case for Product Liability, Professors A. Mitchell Polinsky and Steven Shavell maintained that the benefits of product liability are likely to be less than its costs for many products, especially widely sold ones. The article was intended to alter the dominant view held by the judiciary and commentators that product liability has a clear justification on grounds of public policy. It argued instead that a skeptical attitude toward product liability should be adopted. Professors John Goldberg and Benjamin Zipursky strongly criticize the article in The Easy Case for Products Liability Law: A Response to Professors Polinsky and Shavell. To a significant extent, however, they attack a straw man, for they impute to the article a radical thesis – that product liability should be eliminated for all widely sold products – that Uneasy manifestly did not advance.
Law and Economics Article

The Easy Case for Products Liability Law: A Response to Professors Polinsky and Shavell

Response to The Uneasy Case for Product Liability
Vol. 123 No. 8 The Uneasy Case for Product Liability, authored by Professors A. Mitchell Polinsky and Steven Shavell, cannot sustain the burden it has set for itself. The evidence it marshals is surprisingly scant, consisting of anecdotes about products that suffered declining sales after being linked to certain injuries, observations about consumer’s improved access to safety information, a brief review of inconclusive studies of whether a rule of strict liability better deters the sale of unsafe products than a negligence rule, reminders of the high costs of civil litigation, and a smattering of microeconomic theory. These observations are nowhere near sufficient. In essence, Uneasy argues for the elimination of an entire body of law based on the absence of social scientific evidence of a certain sort demonstrating the significance of its contribution to the goals of deterrence and compensation.
Law and Economics Article

The Uneasy Case for Product Liability

Vol. 123 No. 6 In this Article we compare the benefits of product liability to its costs and conclude that the case for product liability is weak for a wide range of products. One benefit of product liability is that it can induce firms to improve product safety. Even in the absence of product liability, however, firms would often be motivated by market forces to enhance product safety because their sales may fall if their products harm consumers. Moreover, products must frequently conform to safety regulations. Consequently, product liability might not exert a significant additional influence on product safety for many products – and empirical studies of several widely sold products lend support to this hypothesis.