The relationship between crime and punishment is well studied by scholars of sociology, economics and law. Economists contend that punishment is a cost of committing crime, hence an increase in the severity of punishments should decrease incentives to commit crime. This paper studies the relationship between punishment and evidence disclosure. A defendant is trying to persuade a judge by presenting evidence to take a favorable legal action rather than less favorable ones on his case. I show
that the equilibrium disclosure of the defendant is not affected by a change in the scale of legal actions when there is no uncertainty on how the judge evaluates evidence. With uncertainty,
however, the defendant can be induced to disclose more information by decreasing the severity ratio of the most unfavorable legal action to the most favorable one.
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Ticket scalping is frequently related to the economic puzzle of under
pricing by promoters. It is also disputed whether event promoters benefit from
scalper participation or not. Our article explores two questions: can promoters
benefit fromscalpers’ activities andwhat are the resulting consumer welfare effects?
Weaddress these questions by developing a three period gamewhere the secondary
market is supported by an auction mechanism, interacting with primary market
decisions. We find that participation by scalpers can lead to underpricing in the
primarymarket and that thismay benefit small or credit-constrained promoters. This
requires the scalper’s discount factor to be higher than the promoter’s discount
factor. The necessary premium on the discount factor increases with the fraction of
early buyers and decreases with market size. Finally, the effect of scalper participation on aggregate consumer welfare is shown to be positive for a large enough
market size or discount rate for the scalper.
Published in BEJEAP, 2013.
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The relationship between trust and the legitimacy of institutions
has been analyzed in fields ranging from institutional theory in sociology,
political science, psychology and economics. Economic studies
(Knack and Keefer, 1997; La Porta et al., 1997, 1998, 2008; Zack
and Knack, 2001; Algan and Cahuc, 2010; Ho and Hoffman, 2013)
have shown that understanding the relationship between trust and the
rule of law has important implications for understanding development,
investment decisions, and the distribution of wealth. Trust between
investors and entrepreneurs is an important facilitator of investment
and production. Campos-Ortiz et al (2012) found that experimental
subjects coming from countries with higher levels of trust devote more
resources to production and are more likely to refrain from theft. Despite
the importance of the subject, there has been little study on how
institutional trust affects contracts are written. Our paper analyzes
the effect of institutional trust and inter-personal trust on contract
structures, specifically on the way gains are shared, by developing an
investment game in which subjects contract on how to share the surplus.
We vary institutional trust by providing a dispute resolution
system that can accommodate contract breach by the agent, assigning
some of our subjects to a game in which most contracts are enforceable
and others where enforcement probability is lower. We analyze
the differences in contracts that arise as a result of the different environments,
and look at the total investments in the two groups. We
compare our experimental fndings to the analytical predictions given
by a behavioral game theory model that accounts for moral costs of
breaching.
JEL: C9,DO2, D73
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