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The Journal of Law, Economics, and Organization Current Issue

Published: Wed, 08 Nov 2017 00:00:00 GMT

Last Build Date: Fri, 08 Dec 2017 15:08:44 GMT



Wed, 08 Nov 2017 00:00:00 GMT

The Editorial Board of the Journal of Law, Economics, and Organization acknowledges the assistance of:

Households Debt Restructuring: The Re-default Effects of a Debt Suspension

Wed, 08 Nov 2017 00:00:00 GMT

When facing financial distress, French households can file a case to a “households’ over-indebtedness commission” (HDC). The HDC can order an immediate repayment or grant a debt suspension. Exploiting the random assignment of bankruptcy filings to managers, we show that a debt suspension has a very significant and negative effect on the likelihood to re-default but that this impact is only short-lived. The effect depends not only on the characteristics of the households but also on the nature of their indebtedness. Our results imply that rather than focusing on a specific debt profile, above all a deeper restructuring of the expenditure side is necessary to make the plan sustainable in case of an uniform increase of the HDC severity. They also single out specific banks lending to particular fragile households. They indicate the importance of policy actions on budget counseling, as well as the importance of regulation of credit distribution to avoid both entering into bankruptcy and re-filing for bankruptcy. (JEL D14, K35, G28)

Social Impact Bonds: New Product or New Package?*

Wed, 08 Nov 2017 00:00:00 GMT

This paper considers a relatively new form of financing for social services, the “social impact bond (SIB).” Proponents of SIBs argue that they present a solution to several problems in funding social services, including performance incentives and risk allocation. Using a simple model, we first demonstrate that, despite their apparent novelty, SIBs in concept need not produce any difference in outcome from standard financing arrangements with private nonprofit firms. We then argue that SIBs will lead to greater program success if investors’ effort responds to incentives and can positively influence outcomes, either directly (e.g., effort exerted in production) or indirectly (e.g., effort devoted to screening), but are unlikely to do so otherwise. We conclude that, as in the more general theoretical literature, the value of this particular application in terms of funding innovation will be strongly context-dependent. (JEL H4, H53, L3, M14, O35)

Optimal Multistage Adjudication

Wed, 31 May 2017 00:00:00 GMT

In many settings, there are preliminary or interim decision points at which legal cases may be terminated: for example, motions to dismiss and for summary judgment in US civil litigation, grand jury decisions in criminal cases, and agencies’ screening and other exercises of discretion in pursuing investigations. This article analyzes how the decision whether to continue versus terminate should optimally be made when (A) proceeding to the next stage generates further information but at a cost to both the defendant and the government and (B) the prospect of going forward, and ultimately imposing sanctions, deters harmful acts and also chills desirable behavior. This subject involves a mechanism design analogue to the standard value of information problem, one that proves to be qualitatively different and notably more complex. Numerous factors enter into the optimal decision rule—some expected, some subtle, and some counterintuitive. The optimal rule for initial or intermediate stages is also qualitatively different from that for assigning liability at the final stage of adjudication. (JEL D81, D82, K14, K41, K42)

Vertical Integration and Antitrust in Search Markets

Mon, 27 Mar 2017 00:00:00 GMT

This paper studies the integration of an upstream firm in the market for Internet search with downstream services. In 2011, Google integrated its comparison site for flight fares (Google Flights) and restaurant ratings (from a recent acquisition of Zagat) into Google’s search results. I find that Google’s integration of Google Flights led to a reduction in clicks to competing travel agencies for general searches. The acquisition of Zagat’s restaurant ratings led to an increase in clicks, regardless of the content of the search term. The contrasting findings may be explained by the fact that Google Flights provides price information and therefore directly competes with other online travel agents while Google Zagat provides quality information, which may encourage more search on competing review sites. (JEL L40, L86)