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 : Part of a ship's cargo is jettisoned in order to save the vessel and the remaining cargo from imminent peril. How should the loss be shared among the cargo owners? The law of general average, an ancient principle of maritime law, prescribes that the owners share the loss proportionally according to the respective values of their cargo. We analyze whether the law of general average is a truthful and efficient mechanism. That is, we investigate whether it induces truthful reporting of cargo values and yields a Pareto efficient allocation in equilibrium. We show that the law of general average is neither truthful nor efficient if owners have expected utility preferences, but is both truthful and efficient if owners have maxmin utility preferences. We discuss why the maxmin criterion may be reasonable under the circumstances.
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).