ERIC LANGLAIS
Professeur(e)
2024-10
Product Liability Influences Incentives for Horizontal Mergers
Andreea Cosnita-Langlais, Tim Friehe, Eric Langlais
- Abstract
- This paper shows how product liability rules influence merger incentives. Consumers’ misperception of product risk critically influences which liability rule induces the strongest merger incentives. When consumers overestimate product risk, merger incentives under negligence and strict liability are similar and weaker than under no liability. When consumers underestimate product risk, merger incentives under negligence are weaker than those under strict liability but stronger than those under no liability.
- Mot(s) clé(s)
- Liability; Merger; Cournot; Market Structure
2022-20
Incentives to differentiate under environmental liability laws : Product customization and precautionary effort
Andreea Cosnita-Langlais, Eric Langlais
- Abstract
- We endogenize location/product specification choices in a spatial Cournot duopoly on the linear market, when firms' output entails an accidental harm to the environment. Under a strict liability regime, the equilibrium involves no differentiation when the expected harm is low enough. This outcome is suboptimal, and identical to the spatial pattern obtained under a no-liability regime. With larger harm, the equilibrium displays some dispersion/product differentiation, the degree of which is increasing with the level of harm towards the first best locations/product choices. Our results are robusts when allowing for firms' investment in environmental measures. Moreover, we show that vertical/care differentiation occurs whenever horizontal product differentiation arises. Finally, we show that under a negligence rule, firms always comply with the due care level, but the equilibrium involves no differentiation, either horizontal/product or vertical/care.
- Mot(s) clé(s)
- Cournot competition, spatial model, strategic location, product choice, horizontal differentiation, vertical differentitation, environmental liability, strict liability, negligence.
2022-18
Endogenous market structures, product liability, and the scope of product differentiation
Andreea Cosnita-Langlais, Eric Langlais
- Abstract
- The paper considers how product liability may shape firm size, product specification choices and market structure. We introduce a spatial Cournot duopoly on the linear market, where firms make an initial decision of product differentiation, then invest in precaution, before competing in quantity. Our main results are fourfold; 1) with full coverage of the market by the duopoly, there exist two equilibria (in pure strategies): central agglomeration (which is stable for low liability costs), and dispersion (which is stable for not too large liabiliy costs); 2) for larger liability costs, a mixed market structure duopoly/monopoly sustains a unique equilibrium with product differentiation; 3) this equilibrium enables a scope of differentiation higher (smaller) than the full duopoly (the social optimum); 4) the impact of liability costs on firms size and profits is complex, since it depends on the impact on both product differentiation and market structure. Finally, we show that consumer surplus and social welfare are both higher under the mixed market structure than under the full duopoly in an equilibrium with product differentiation.
- Mot(s) clé(s)
- horizontal differentiation, Cournot competition, spatial model, endogenous market structures, product liability, strict liability, negligence
2020-25
Should environment be a concern for competition policy when firms face environmental liability ?
Maxime Charreire, Eric Langlais
- Abstract
- This paper considers an oligopoly where firms produce a joint and indivisible environmental harm as a by-product of their output. We first analyze the effects on the oligopoly equilibrium of alternative designs in environmental liability law, secondly, we discuss the rationale for "non-conventional" competition policies, i.e. more concerned with public interest such as the preservation of human health or environment. We study firms decisions of care and output under various liability regimes (strict liability vs negligence) associated with alternative damages apportionment rules (per capita vs market share rule), and with damages multipliers. We find that basing an environmental liability law on the combination of strict liability, the per capita rule, and an "optimal" damages multiplier, is consistent with a conservative competition policy, focused on consumers surplus, since, weakening firms' market power also increases aggregate expenditures in environment preservation and social welfare. In contrast, a shift to the market share rule, or to a negligence regime, may be consistent with a restriction of competition, since firms' entry may instead lead to a decrease in aggregate environmental expenditures and losses of social welfare. Nevertheless the fine tuning of the policy requires specific information from a Competition Authority, which we discuss as well.
- Mot(s) clé(s)
- Strict liability; negligence; damages apportionment rules; market share liability; environmental liability; Cournot oligopoly; competition policy.
2019-23
Product liability when cumulative harm is incurred by both consumers and third parties
Tim Friehe, Eric Langlais, Elisabeth Schulte
- Abstract
- Traditional law and economics analyses of product liability assume that expected harm is proportional to usage. This paper builds on Daughety and Reinganum (2013a, 2014) by assuming that harm increases and is convex in usage. In contrast to previous contributions, we analyze liability rules when not only consumers but also third parties incur harm. We show that the social ranking of liability rules previously established for the case in which only consumers suffer harm (strict liability dominates no liability and negligence)may be reversed if third party harm is sufficiently important.
- Mot(s) clé(s)
- Product liability; Cumulative harm; Environmental harm
2018-43
On consumer preferences for (partial) products liability
Tim Friehe, Eric Langlais, Elisabeth Schulte
- Abstract
- Traditional law and economics analyses of products liability find that different liability regimes lead to the same market outcome, implying that risk-neutral consumers are indifferent between products liability and no products liability. We present a setup in which a group of consumers supports the implementation of products liability although its enforcement is costly. All consumers may prefer the same level of (partial) products liability.
- Mot(s) clé(s)
- Product Liability, Monopoly, Political Economy
2015-40
Public law enforcers and political competition
Eric Langlais, Marie Obidzinski
- Abstract
- In this paper, we analyze how political competition affects the designof public law enforcement policies. Assuming that the cost of enforcement is linear, criminals'type is uniformally distributed, and society's wealth is large enough, the article arrives at two main conclusions: 1) electoral competition entails no loss of efficiency at equilibrium for both minor and major offenses (e.g. minor offenses are not enforced, while major ones are fully deterred); 2) different distortions arises at equilibrium for the intermediate offenses: enforcement expenditures for small offenses are lower than the optimal level, such that the issue of under-deterrence is exacerbated; in contrast, for larger offenses, enforcement measures are higher, and there is more deterrence than what efficiency requires. We show that these results also holds under more general assumptions (convex costs of enforcement, a general cdf of illegal bene.ts, a lower society's wealth), excepted that full deterrence of major offenses is not achievable.
- Mot(s) clé(s)
- Public law enforcement, deterrence, monetary sanctions, electoral competition.
2014-59
The structure of fines in the light of political competition
Eric Langlais, Marie Obidzinski
- Abstract
- This paper analyzes the determinants of public law enforcement policies when citizens vote for the timing and level of fines. We consider situations where citizens and politicians disagree on the value of the expected social harm associated with some activities. We find that citizens vote for act-based (harm-based) sanctions when they expect that social harm is low (resp high). On the other hand, we show that the equilibrium fines may be higher or lower than the optimal one, depending on the difference between politicians and citizens' expectations.
- Mot(s) clé(s)
- timing of sanction, law enforcement, deterrence, political competition, majority rule.
2014-41
On patent strength, litigation costs, and patent disputes under alternative damage rules
Bertrand Chopard, Thomas Cortade, Eric Langlais
- Abstract
- This paper analyzes the effects of two damage rules (Lost Profi t vs Unjust Enrichment) mainly used by Courts in patent litigations. In our model, the Infringer either is a mere imitator of the Patentee or introduces incremental innovations, and litigation costs are private information such that a pretrial settlement may be better for both litigants. We show that the Unjust Enrichment rule yields less trials than the Lost Pro fit one. But regarding three main objectives, Patentee's protection, incentives to invest in R&D, and social welfare maximization,we find that no rule is better than the other generally speaking. Our model also allows to emphasize how the combination between the size of litigation costs, the negotiation gains and the IPR strength, shapes the incentives to enforce as well infringe a IPR, although in a way specifi c to each rule.
- Mot(s) clé(s)
- intellectual property, probabilistic patents, patent litigations, incremental innovations, pretrial negotiations, legal costs, imperfect competition.
2014-8
On the Political Economy of Public Safety Investments
Tim Friehe, Eric Langlais
- Abstract
- This paper explores the interaction of private precaution and public safety investments when the latter are determined in a political process. We distinguish the scenarios
in which the median victim infuences public safety from the one in which the injurer lobbies the public agent, and analyze both negligence and strict liability with a defense of contributory negligence. We establish that the levels of injurer and victim care are always socially optimal for the equilibrium level of public safety. However, the equilibrium level of public safety differs from its fi rst-best level and drastically depends on both the specifi cs of the political process and the liability rule applied. This entails that the level of social costs is critically determined by the choice between liability rules for a given political process. - Mot(s) clé(s)
- liability law, care levels, public safety, political economy, median voter,firm lobbying
2013-37
Damage rules and the patent hold-up problem : An analysis of Article L. 615-7
Bertrand Chopard, Thomas Cortade, Eric Langlais
- Abstract
- This paper provides an analysis of two damage rules (Lost Profi t versus Unjust Enrichment) introduced in the French Code de la Propriété Intellectuelle in 2007 (Loi du 27 Octobre 2007, Art. L. 615-7). We use a simple sequential game where both the decisions to infringe and to enforce the patent, as well as the decisions to accomodate, settle or litigate the case, and the outputs decisions (Cournot competition) are endogenous. We characterize the equilibria associated with each rule, and compare their properties. We show that: 1/ the Unjust Enrichment rule provides Patentees with higher damages compensation than the Lost Pro fit one; however, 2/ Lost Profi t induces more deterrence of infringement, and is associated with less trials than Unjust Enrichment; 3/ Unjust Enrichment may deter the Patentee to enforce his right; 4/ when there is a positive probability that the case settles, Patentee's expected utility is higher under Lost Profi t than under Unjust Enrichment.
- Mot(s) clé(s)
- lost profi t rule, unjust enrichment rule, intellectual property rights, patent litigations, pretrial negotiations
2013-35
Elected vs appointed public law enforcers
Eric Langlais, Marie Obidzinski
- Abstract
- This paper revisits the issue of law enforcement and the design of monetary sanctions when the public law enforcer's incentives depart from those of a benevolent authority, which is the most frequent assumption made in the literature on crime deterrence. We rst consider the case of an elected enforcer. We nd that when the harm generated by offenses is quite small relative to the average private bene ts, equilibrium with weak enforcement/low sanction prevails. Instead, when the harm generated by offenses is high relative to the average private bene ts, it is the equilibrium with strong enforcement/high sanctions that prevails. Therefore, we provide an explanation for the empirical puzzle highlighted by Lin(2007): elected enforcers punish major (minor) crimes more (less) severely than the benevolent social planer. The case of an appointed enforcer prone to rent seeking is also considered. The monetary sanction under rent seeking is closer to the utilitarian level, as compared with the one under election.
- Mot(s) clé(s)
- law enforcement, deterrence, monetary sanctions, punishment, electoral competition, democracy, rent seeking, dictature
2013-5
Asymmetries in Rent-Seeking
Giuseppe Dari-Mattiacci, Eric Langlais, Bruno Lovat, Francesco Parisi
- Abstract
- In rent-seeking contests, players are seldom identical to one another. In this chapter, we examine the rent-seeking literature that explores the effects of specific forms of asymmetry between contestants. We consider Tullock’s rentseeking contests involving two players who differ in strength (marginal returns to effort), motivation (valuations of the sought-after rent) and cunning (bargaining power). We study the combined interaction of these three possible forms of asymmetry in rent-seeking. We examine how these asymmetries affect the rent-seeking contest and investigate the effect of ex post trading opportunities on the players’ efforts, on probabilities of winning and on the social costs of rent-seeking.
- Mot(s) clé(s)
- rent-seeking games, returns to effort, asymmetric rents, asymmetric strength, tradable rents
2012-10
L’effacement des dettes des particuliers surendettés : Une étude empirique des décisions judiciaires
Régis Blazy, Bertrand Chopard, Eric Langlais, Ydriss Ziane
- Abstract
- In this paper, we explore the mechanisms employed by the French judges while discharging personal debts in exchange for liquidation of debtors' assets. Our empirical results highlight the determinants of judicial selection between debtors whose debts are wiped out and those who have to reimburse them. These empirical results help us to understand better how much French personal bankruptcy law is rather pro creditor than pro debtor.
- Mot(s) clé(s)
- personal bankruptcy, courts, debt restructurings
2011-33
Analyse économique et droit pénal : contributions, débats, limites
Eric Langlais
- Abstract
- The paper surveys the main criticisms against the economics of crime à la Becker (JPE, 1968). Some of them (external criticisms) are more focused on methological issues, and are mainly addressed by lawyers. Others (internal criticisms) aim at challenging the central result, according to which large monetary penalties (maximal ones, in fact) induce optimal deterrence, while the probability of controling and sanctioning criminals should be as small as possible. In conclusion, the paper discuss some empirical results.
- Mot(s) clé(s)
- economics of crime, Becker, deterrence and optimal enforcement of law, objectives of the penal code
2011-15
Personal Bankruptcy Law, Fresh Starts, and Judicial Practice
Régis Blazy, Bertrand Chopard, Eric Langlais, Ydriss Ziane
- Abstract
- We explore the ways French judges respond to the possibility of discharging personal debts in exchange for liquidation of debtors’ assets. We present empirical results on the determinants of judicial selection between debtors whose debts are wiped out and those who have to reimburse them. We find that French judges tend to disqualify debtors with multiple creditors from debt discharge, and are sensitive to regional labor market conditions. These empirical results help us understand better how French personal bankruptcy laws perform compared to other national systems. Finally, our results serve to fill the gap between bankruptcy rules and judicial practice.
- Mot(s) clé(s)
- Personal bankruptcy, over-indebtedness
2011-14
Informational Externalities and Settlements in Mass Tort Litigations
Bruno Deffains, Eric Langlais
- Abstract
- This paper elaborates on a basic model of mass tort litigation, highlighting the existence of positive informational externalities a¤orded by
the discovery process (as a general technology of production of evidences) in order to study when a class action is formed, or when a sequence of individual trials is more likely. We illustrate the argument that when several plaintiffs file individually a lawsuit against the same tortfeasor, the resolution of the various cases through repeated trials produces positive informational externalities. When class actions are forbidden, these externalities only benefit to the later plaintiffs (through precedents, jurisprudence...). When they are allowed, the first filer may have an incentive to initiate a class action as far as it enables him to benefit from these externalities, through the sharing of information with later filers. We provide sufficient conditions under which a class action is formed, assuming a perfect discovery process. We also show that when contingent fees are used to reward attorneys' services, plaintiffs become neutral to the arrival of new information on their case. - Mot(s) clé(s)
- Mass Tort Class Action, information sharing, repeated litigation, contingent fees
2011-11
Responsabilité civile et contrôle des activités représentant des risques mal connus
Eric Langlais
- Abstract
- This note focuses on the design of prevention programmes and the role of tort law regarding the control of risky activities, associated with unknown or imperfectly known risks, such as innovation or (long term) environmental damages. Together with the existence of perception bias on the side of citizens, these risks are specific in that they are not insurable.
- Mot(s) clé(s)
2009-11
Deterrence of a criminal team: how to rely on its members’shortcomings ?
Eric Langlais
- Abstract
- In this paper, we assume that a criminal organization is an agency where the Principal and the Agent have different sensibilities towards the risk of arrestation and punishment, and at the same time have different skills with respect to general organization tasks, crime realization or detection avoidance activities (i.e. allowing to reduce the probability of detection). In this set up, we first compare two regimes of exclusive sanctions (either the sanctions are borne by the Principal/beneficiary of the crime, or they are borne by the Agent/perpetrator of the crime), and we analyze the comparative efficiency of the various instruments which are at the disposal of public authorities to prevent corporation in criminal activities (frequency of control and level of monetary penalties). Finally, we study a case with joint liability.
- Mot(s) clé(s)
- Criminal teams, corporate criminality, state dependent risk aversion, deterrence, monetary penalties versus detection
2009-10
Défaut de paiement stratégique et loi sur les défaillances d’entreprises
Bertrand Chopard, Eric Langlais
- Abstract
- L’enseignement qui est habituellement retenu des travaux empiriques réalisés à la suite de La Porta, Lopez-de-Silanes, Shleifer et Vishny (1997), est qu’il convient de promouvoir un haut niveau de protection juridique des créanciers. A l’inverse de cette recommandation, certains pays européens (Royaume-Uni, Allemagne) ont pourtant récemment réformé leurs dispositifs touchant au droit des défaillances dans un sens qui les rapprochent de pays qui traditionnellement privilégient la préservation des emprunteurs (Etats-Unis, France). Ce papier propose une analyse du bénéfice social d’une telle orientation du droit de la défaillance, dans un modèle stylisé où la capacité de remboursement de l’emprunteur est une information privée. On étudie tout d’abord l’effet de l’orientation des règles juridiques (système pro-créanciers versus pro-débiteurs) sur le comportement des parties au contrat en fonction du type de concurrence bancaire. Nous discutons ensuite les instruments à la disposition des autorités judiciaires afin de garantir que l’évolution d’un système pro-créanciers vers un système pro-débiteurs dégage un bénéfice social. Nos résultats suggèrent qu’il existerait, en fonction de l’objectif assigné au droit, une cohérence entre l’orientation des dispositifs encadrant la défaillance et l’intensité de la concurrence bancaire.
- Mot(s) clé(s)
2009-9
On unilateral divorce and the "selection of marriages" hypothesis
Eric Langlais
- Abstract
- This paper revisits the issue of the unilateral divorce law, taking into account that: 1/ the decisions to engage in marriage and then to divorce or to stay married are fundamentally sequential decisions; 2/ household consumption has a large joint component, generating economies of scale. The unilateral divorce law is modelled through the combination of exclusive rights on the marriage dissolution and a monetary transfer to the parent having custody of the children. We analyze the influence of alternative compensation rules both in the short run (probability and efficiency of divorce) and in the long run (selection of marriages). We also show that a decrease in the costs of divorce proceedings has by no means commonplace consequences on marriage ontracting; particularly when consideration of parent's altruism and child support is introduced, more marriages are contracted when the cost of divorces decreases.
- Mot(s) clé(s)
- marriage models, unilateral divorce law, the parents'altruism and protective measures for children
2009-8
Legal Interpretative Process and Litigants’Cognitive Biases
Bruno Deffains, Eric Langlais
- Abstract
- For contemporary legal theory, law is essentially an interpretative and hermeneutics practice (Ackerman (1991), Horwitz (1992)). A straightforward consequence is that legal disputes between parties are motivated by their divergent interpretations regarding what the law says on their case. This point of view fits well with the growing evidence showing that litigants’ cognitive performances display optimistic bias or self-serving bias (Babcock and Lowenstein (1997)). This paper provides a theoretical analysis of the influence of such a cognitive bias on pretrial negotiations. However, we also consider that this effect is mitigated because of the litigants’ confidence in their own ability to predict the verdict; we model this issue assuming that litigants are risk averse in the sense of Yaari (1987), i.e. they display a kind of (rational) probability distortion which is also well documented in experimental economics. In a model à la Bebcuck (1984), we show that the consequences of self-serving bias are partially consistent with the "optimistic model", but that parties’ risk aversion has more ambiguous/unpredictable effects. These results contribute to explaining that the beliefs in the result of the trial are not sufficient in themselves to understand the behaviors of litigants. As suggested by legal theory, the confidence the parties have in their beliefs is probably more important.
- Mot(s) clé(s)
- litigation, self-serving bias, risk aversion
2008-40
On the Ambiguous Effects of Repression
Eric Langlais
- Abstract
- The purpose of this note is to investigate the optimal enforcement of the penal code when criminals invest in a specific class of avoidance activities termed dissembling activities (i.e. self-protection efforts undertaken by criminals to hedge their illegal gains in case of detection and arrestation). We show that the penal law may have two different screening effects: it may separate the population of potential criminals between those who commit the crime and those who do not, and in the former group, between those who undertake dissembling efforts and those who do not. Then, we show that it is never optimal to use less than the maximal fine in contrast to what may occur with avoidance detection (i.e. efforts undertaken in order to reduce the probability of arrestation: MALIK [1990]); and furthermore, that the optimal penal code may imply overdeterrence. Finally, we show that any reform of the penal code has ambiguous effects when criminals undertake dissembling activities which are a by-product of illegal activities, since increasing the maximum possible fine may increase or decrease the number of crimes committed and may increase or decrease the proportion of illegal gains hedged by criminals.
- Mot(s) clé(s)
- deterrence, dissembling activities, optimal enforcement of law
2008-34
Social Wealth and Optimal Care
Giuseppe Dari-Mattiacci, Eric Langlais
- Abstract
- Many industrial accidents result in losses (material damages or bodily
injury) that cannot be perfectly compensated by a monetary payment, nor
be perfectly insured. Moreover, often injurers control ex ante the magnitude
rather than the probability of accidents. We study the characteristics
of optimal levels of care and distribution of risk under these circumstances.
We then examine whether ordinary liability rules, regulation, insurance,
taxes and subsidies can be used to implement the first-best outcome. Finally,
our results are discuss in the light of fairness considerations (second
best view). - Mot(s) clé(s)
- accidents, risk, wealth, care, bodily injury
2008-33
On insurance contract design for low probability events
Eric Langlais
- Abstract
- This paper extends the analysis of insurance contracts design to the case of "low probability events", when there is a probability mass on the event "no accident-zero loss". The optimality of the deductible clause is discussed both at the theoretical and empirical levels.
- Mot(s) clé(s)
- Optimal insurance design, low probability events, insurance coverage for catastrophic risks
2008-32
Trial and settlement negotiations between asymmetrically skilled parties
Bertrand Chopard, Thomas Cortade, Eric Langlais
- Abstract
- Parties engaged in a litigation generally enter the discovery process with different informations
regarding their case and/or an unequal endowment in terms of skill and ability to
produce evidence and predict the outcome of a trial. Hence, they have to bear different legal
costs to assess the (equilibrium) plaintiff’s win rate. The paper analyses pretrial negotiations
and revisits the selection hypothesis in the case where these legal expenditures are private
information. This assumption is consistent with empirical evidence (Osborne, 1999). Two
alternative situations are investigated, depending on whether there exists a unilateral or a
bilateral informational asymmetry. Our general result is that efficient pretrial negotiations select
cases with the smallest legal expenditures as those going to trial, while cases with largest
costs prefer to settle. Under the one-sided asymmetric information assumption, we find that
the American rule yields more trials and higher aggregate legal expenditures than the French
and British rules. The two-sided case leads to a higher rate of trials, but in contrast provides
less clear-cut predictions regarding the influence of fee-shifting. - Mot(s) clé(s)
- litigation, unilateral and bilateral asymmetric information, legal expenditures
2008-31
Le "risque judiciaire" et les licenciements en France: le point de vue de l’économie du risque
Eric Langlais
- Abstract
- Le droit du licenciement expose-t-il les entreprises françaises à un "risque judiciaire"? L’article
discute les arguments des différentes thèses (Blanchard et Tirole (2003), Cahuc et Kramarz (2004),
Munoz-Perez et Serverin (2005)) en interprétant les informations empiriques disponibles relatives
aux décisions des salariés (acceptation/contestation) et des entreprises (choix du motif de licenciement)
à partir des instruments de l’économie du risque. Nous montrons que l’analyse des données
relatives aux recours devant les Prud’Hommes suggère de la part des salariés une attitude
nettement moins riscophobe (voire clairement riscophile) que celle habituellement révélée sur les
marchés du risque. Par ailleurs, nous montrons que le licenciement pour motif personnel n’apparait
comme systématiquement préférable au motif économique que dans la mesure où les entreprises sont
supposées riscophobes. A l’inverse, la comparaison du coût anticipé d’un licenciement entre le motif
économique et le motif personnel apparait très sensible aux hypothèses concernant l’ancienneté du
salarié, le taux de rejet du salarié devant les Prud’Hommes, ou le coût indirect du licenciement. - Mot(s) clé(s)
- licenciements, Prud’Hommes, risque judiciaire
2008-30
Asymmetric information, self-serving bias and the pretrial negotiation impasse
Eric Langlais
- Abstract
- There is evidence that asymmetric information does exist between litigants: not in a way supporting Bebchuk (1984)’s assumption that defendants’ degree of fault is private information, but more likely as a result of parties’ predictive capacity about the outcome at trial (Osborne, 1999). In this paper, we investigate the incidence of one component of this asymmetric predictive power, which has been examplified in experimental economics. We assume that litigants assess their priors on the plaintiff’s prevailing rate at trial in a way consistent with the self-serving bias, which is the source of the asymmetric information. We compare the predictions of this model regarding the influence of individual priors with those in the literature. Finally, we analyse the influence of another reason for probability distorsion, i.e. risk aversion in the sense of Yaari (1987).
- Mot(s) clé(s)
- litigation, pretrial bargaining, self-serving bias, risk aversion
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