Judicial Errors, Legal Standards and Innovative Activity
We analyze the effects of judicial errors on the innovative activity of firms. Successful research investment allows to take a new action that may be ex-post welfare enhancing or welfare decreasing (illegal). Deterrence in this setting works by affecting both the incentives to invest in research and the ex-post choice of the action (marginal deterrence). The two goals may contrast each other and their relative importance shapes the optimal policy. For increasing probabilities of social harm, the enforcer initially promotes research and disregards marginal deterrence: in this case no accuracy is chosen and the policy adopts first a per-se legality and then a (moderately enforced) per-se illegality rule. Conversely, for higher likelihood of social harm, the enforcer favors marginal deterrence eliciting the ex-post efficient actions at the cost of depressing firm’s investment: the optimal policy calls for positive .nes and improved accuracy, with a stronger effort to reduce type-I than type-II errors and the adoption of asymmetric protocols of investigation. Improved accuracy allows to discriminate between beneficial and harmful actions, an instance of effect-based legal standard.
|Date of creation:||20 Feb 2008|
|Date of revision:||04 Jun 2010|
|Publication status:||Published in International Review of Law and Economics, 2014, 40, pp. 36-50 with the title "Antitrust in Innovative Industries: The Optimal Legal Standards"|
|Contact details of provider:|| Postal: |
Phone: +39 081 - 675372
Fax: +39 081 - 675372
Web page: http://www.csef.it/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gual, Jordi & Hellwig, Martin F. & Perrot, Anne & Polo, Michele & Rey, Patrick & Schmidt, Klaus M. & Stenbacka, Rune, 2005.
"An Economic Approach to Article 82,"
Discussion Papers in Economics
745, University of Munich, Department of Economics.
- Steven Shavell & A. Mitchell Polinsky, 2000.
"The Economic Theory of Public Enforcement of Law,"
Journal of Economic Literature,
American Economic Association, vol. 38(1), pages 45-76, March.
- Louis Kaplow & Steven Shavell, 1992.
"Accuracy in the Determination of Liability,"
NBER Working Papers
4203, National Bureau of Economic Research, Inc.
- Gary S. Becker, 1968.
"Crime and Punishment: An Economic Approach,"
Journal of Political Economy,
University of Chicago Press, vol. 76, pages 169.
- Png, I. P. L., 1986. "Optimal subsidies and damages in the presence of judicial error," International Review of Law and Economics, Elsevier, vol. 6(1), pages 101-105, June.
- Louis Kaplow & Steven Shavell, 1993.
"Accuracy in the Assessment of Damages,"
NBER Working Papers
4287, National Bureau of Economic Research, Inc.
- Giovanni Immordino & Marco Pagano & Michele Polo, 2006.
"Norm Flexibility and Private Initiative,"
314, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Kaplow, Louis, 1994. "The Value of Accuracy in Adjudication: An Economic Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 307-401, January.
When requesting a correction, please mention this item's handle: RePEc:sef:csefwp:196. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lia Ambrosio)
If references are entirely missing, you can add them using this form.