WEBINAR TELE – THEORETICAL EUROPEAN LAW & ECONOMICS

co-authored with Avraham Tabbach (Tel Aviv University, Israel)
Abstract : In various legal scenarios, litigants often seek court approval for settlements that are questionable, yet mutually advantageous for the parties. Examples abound: in class actions, settling parties frequently seek excessive attorneys' fees; in plea-bargains, a lenient sentence is often pursued; in tort cases, parties seek the sealing of settlements, and so forth. This paper explores the dynamics of this "bargain" between litigants and judges, in the presence of asymmetric information. On one hand, judges approving requested benefits may facilitate settlements, but on the other hand, such approvals can foster further demands. Our analysis reveals that while granting these benefits may lead to a substantial reduction in trial rates, judges should generally deny such requests (unless they are not aligned with the interests of the judiciary). Further, we propose practical mechanisms that capitalize on this dynamic to incentivize truthful benefit demands and facilitate settlements that judges could approve.

Abstract : A jury is informed of the amount of leniency or concession promised to an eyewitness for testifying against a defendant, which provides information on the credibility of the testimony. This paper shows that a higher concession amount reduces the credibility even though a higher concession attracts honest testimonies as well as perjuries. When making an offer to a potential eyewitness, a prosecutor therefore faces the trade-off that a higher amount of concession produces more testimonies (both truth and perjury), but reduces the testimonies' credibility. By endogenizing the payment for testimony, this paper shows that an increase in the probability of detecting perjury or in the perjury sanction may increase the incentive to purchase testimonies and have the unintended consequences of increasing the chance of perjury and increasing the chance of wrongly convicting a defendant. A court that cares about the Type 1 and Type 2 errors should adjust the standard of the proof higher when the prosecutor can pay for testimonies. Under the optimal standard of proof, the court benefits from a higher probability of perjury detection.

co-authored with Alessandro De Chiara (University of Barcelona, Spain), Juan José Ganuza (University Pompeu Fabra), Fernando Gómez (University Pompeu Fabra) and Adrian Segura (University Pompeu Fabra).

Abstract. This paper presents a framework where sellers, an online platform with monopoly power, and consumers transact. We aim to study the interaction between the imposition of liability on the platform, the reputational sanctions exerted by consumers, and the internal measures adopted by the platform to keep in check the sellers, whenever a product generates losses to consumers. We show that introducing direct legal liability of the platform may have both positive and negative effects for safety investments. Additionally, when sellers are heterogeneous (with respect to their sensitivity to the sanctions from consumers or from the platform), legal liability on the platform will have an impact on the selection of participating sellers, although the sign and size of the effect largely depend on parameter values.

co-authored with Giuseppe Dari-Mattiacci (University of Amsterdam, Faculty of Law)

Abstract: We show how legal uncertainty can enable simple legal standards to produce socially useful differentiation in incentives that better accommodates heterogeneity. First, legal uncertainty smooths out the discontinuities in incentives that coarse legal standards would otherwise produce. Second, individuals rationally form beliefs about legal standards in part by projecting their own circumstances. We apply our analysis to a range of issues in legal design, including the choice between rules and standards, the optimal degree of legal complexity, and the choice between “sanctions” (e.g., the negligence rule) and “prices” (e.g., strict liability).