Coase and transaction costs reconsidered: the case of the English lighthouse system Abstract What is Coase’s understanding of transaction costs in economic theory and history? Our argument in this paper is twofold, one theoretical and the other empirical. First, Coase regarded positive transaction costs as the beginning, not the end, of any analysis of market processes. From a Coasean perspective, positive transaction costs represent a profit opportunity for entrepreneurs to erode such transaction costs, namely by creating gains from trade through institutional innovation. We demonstrate the practical relevance of entrepreneurship for reducing transaction costs by revisiting the case of the lightship at the Nore, an entrepreneurial venture which had arisen to erode the transaction costs associated with regulation by Trinity House, the main lighthouse authority of England and Wales. By intervening into the entrepreneurial market process, Trinity House would pave the way for the nationalization of the entire English and Welsh lighthouse system. By connecting our theoretical contribution with an empirical application, we wish to illustrate that Coase’s theoretical understanding of transaction costs is inherently linked to an empirical analysis of market processes.

How to turn crowding-out into crowding-in? An innovative instrument and some law-related examples Abstract Using a simple decision-theoretic approach, we formalize how agents with different kinds of intrinsic motivations react to the introduction of monetary incentives. We contend that empirical results supporting the existence of a crowding-out effect under various legal procedures hide a more complex reality, where some individuals contribute thanks to these additional monetary incentives while others reduce their contributions. Our approach allows us to study the theoretical ability of the self selection mechanism (Mellström and Johannesson in J Eur Econ Assoc 6:845–863, 2008; Beretti et al. in Kyklos 66(1):63–77, 2013) to reduce the likelihood to backfire against the cause it is meant to promote. This mechanism consists of a monetary payment for the pro-social behavior and it offers agents the choice to either keep the money for themselves or to direct it to a charity. We show that this legal procedure dominates others more classical procedures because it taps wisely into the motivational heterogeneity of individuals. It uses a self-selection mechanism to match adequate monetary incentives with individuals’ types regarding intrinsic motivations. It may even turn a situation subject to crowding-out into a crowding-in outcome.

Law enforcement with criminal organizations and endogenous collaboration Abstract This paper proposes a simple framework consisting of a law enforcement model in which criminal organizations (Mafias) can collaborate with each other to control an illegal market. Within this framework, we investigate two different situations: (1) a single monopolistic criminal organization operation or (2) an organization collaborating with another criminal organization. Depending on the quality of the controlled illegal market, the welfare implications of these scenarios vary. This paper also investigates an incentive for criminal organizations to engage in endogenous cooperation. As a result, we explore how criminal organizations’ incentives coincide with social welfare implications.

The efficiency of bankruptcy law: evidence of creditor protection in Poland Abstract A debt does not function as a liquid asset in an ineffective enforcement environment. In this study, we investigated the efficiency of creditor protection in insolvency. We approached efficiency in three dimensions: ex ante, ex post, and interim. This paper presents the differences between Polish and Spanish ex ante efficiency, the factors influencing the interim recovery rate and efficiency, and the differences between ex ante and ex post efficiency in Polish proceedings. We studied 17,494 financial statements of Polish companies and the finalized proceedings of 784 court cases from the period 2004–2012. We applied regression analysis, combined with classification and robustness tests. Our evidence supports the conclusion that Polish insolvency proceedings are inefficient. The interim efficiency oscillates at 12% per annum. The duration of the proceeding from filing until resolution takes an average of 853 days. These results have policy implications, as creditor protection is a major aspect in attracting investment for net foreign debtors.

Consensus and dissent in the resolution of conflicts of competence by the Spanish Constitutional Court: the role of federalism and ideology Abstract Given the lack of unambiguously constitutional foundations, Spain’s Constitutional Court (TC) has being playing a leading role in building the regulatory framework of the Autonomic State. This paper analyses whether this function is sufficient to explain the level of agreement among TC justices when adopting their resolutions, and in particular, on reaching unanimous rulings. If so, the legalist/federalist model would be a more adequate model to explain the behaviour of TC justices than the other models proposed in the literature on judicial behaviour: the attitudinal and the strategic models. A database has been constructed for this purpose with the 390 positive conflicts of competence between the central government and the autonomous communities resolved by the TC from 1981 to 2017, which have been used to estimate various explanatory models of unanimous rulings. The results obtained show the importance of the legalist/federalist model when attempting to explain unanimity in the Court’s pronouncements, but they also offer evidence that there are other factors that also influence the level of agreement among TC justices, remarkably the ideological ones.

The apolitical lawyer: experimental evidence of a framing effect Abstract Behavioural law and economics has established a burgeoning research agenda investigating the impact of bias and heuristics on legal decision-making. One of the most important behavioural contributions concerns the impact of framing on choice. The present article expands this line of scholarship by developing a novel hypothesis under which lawyers’ attachment to objectivity and neutrality is assumed to militate against frames challenging the profession’s underlying norms. More specifically, the “apolitical hypothesis” expects the attachment of legally irrelevant political motivation to legal arguments to decrease their attractiveness. The hypothesis is tested in an experimental setting accounting for a varying degree of legal indeterminacy in the domain of European Union law. The experimental results show support for the hypothesis: a political frame made law students 12–24% more likely to select the “apolitical” legal option.

Bankruptcy procedures in the post-transition economies Abstract In the absence of well-developed financial markets, bankruptcy procedures provide useful mechanisms to ease and organize the capital transfers of distressed businesses. From an investor’s perspective, such court-supervised ways of solving financial distress are part of the attractiveness of the post-transition economies that eventually integrated the European Union. This article originally analyzes the content of bankruptcy files handled by the courts operating in three Eastern European countries: Hungary, Poland, and Romania. Our approach mostly focuses on the two fundamental issues that bankruptcy courts must solve when the question of repayments arises: (1) maximizing and (2) sharing the debtor’s value. We first find that the investors’ recovery power strongly depends on the local rules prevailing after bankruptcy filing (legal indexes) and on the type of procedure engaged (reorganization vs. liquidation). Second, total recoveries do not benefit from the presence of public claims suggesting some passivity from the state, in the context of post-transition. Conversely, junior creditors exert a positive influence on total recoveries despite their poor legal protection, which contrasts with secured creditors (confirming the bad incentives that collaterals may generate). In addition, as in Western Europe, the Eastern European bankruptcy systems provide stronger protection for private secured claims than for public claims.

Indigenous land demarcation conflicts in Brazil: Has the Supreme Court’s decision brought (in)stability? Abstract We investigate judiciary decision-making patterns regarding property rights conflicts between native Brazilians and rural farmers in the Midwest region of Brazil. Our main contribution is the use of the qualitative comparative analysis (QCA) method for the evaluation of the issue. We use QCA to examine a unique database composed of cases heard by a regional federal court in Brazil between 1999 and 2013. Our empirical analysis is based on the outcomes of the individual judicial procedures along with the specific laws and jurisprudences evoked by the federal judges in making their decisions. We find evidence that a major case settled by the Brazilian Supreme Court in 2009, celebrated as a landmark in national jurisprudence and expected to bring stability to the conflicts, did not have this effect on lower courts’ judgments. In fact, the 2009 decision triggered a proliferation of different interpretations among judges about how to analyze the land conflicts, thus changing the structure of the judges’ decisions. Based on these findings, we can shed new light on the dynamics of judicial decision-making regarding property rights conflicts of indigenous lands in Brazil.

On the choice of legal standards: a positive theory for comparative analysis Abstract In contrast to existing economic theory on the choice of legal standards in the enforcement of Competition Law, we develop a modelling framework that accounts explicitly for (a) Courts’ choices, given the substantive standard adopted and (b) Competition Authorities (CAs) setting legal standards anticipating Courts’ choices, recognizing that CAs place at least some weight on the implications of their choices for the outcome of the judicial review process and, hence, for their reputation. We then show why CAs may favor Per Se type standards (even when an error-minimising or welfare maximization approach would suggest the choice of an effects-based standard), with sub-optimal utilization of economic analysis, how this choice is affected by the Courts’ substantive standards, why the legal standards for any given conduct may differ between countries, why there may be a U-shaped empirical relationship between legal standards and the probability that the CA’s decisions are annuled and how the choice of standards affects other aspects of enforcement, such as the number of investigations undertaken.

Compensation in personal injury cases: mean or median income? Abstract Courts typically base compensation for loss of income in personal injury cases on either mean or median work income. Yet, quantitatively, mean and median incomes are typically very different. For example, in the US, median income is 65% of mean income. In this paper we use economic theory to determine the relation between the appropriate make-whole (full) compensation and mean and median work incomes. Given that consumption uncertainty associated with compensation generally exceeds that associated with work income, we show that the appropriate make-whole compensation exceeds mean (and therefore median) work income. Hence, if the compensation must be either the mean or the median work income, then mean work income should generally be selected.