Research

Recent Publications

Experimental Economics and the Law, (with C. Holt), in 1 Oxford Handbook of Law and Economics 78 (Francesco Parisi ed., Oxford University Press ).
Abstract
This chapter surveys the past and future role of experimental economics in legal research and practice. Following a brief explanation of the theory and methodology of experimental economics, the chapter discusses topics in each of three broad application areas: (1) the use of experiments for studying legal institutions such as settlement bargaining and adjudicative functions, (2) the use of experiments to explore legal doctrines, and (3) the use of experiments in litigation and trial strategy. The general theme of this material is a broad and versatile relationship between law and experimental economics.
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Published Version
Why Wait to Settle? An Experimental Test of the Asymmetric Information Hypothesis, 59 Journal of Law & Economics 497 ().
Abstract
The U.S. legal system encourages civil litigants to quickly settle their disputes, yet lengthy and expensive delays often precede private settlements. The causes of these delays are uncertain. This paper describes an economic experiment designed to test one popular hypothesis: that asymmetric information might be a contributing cause of observed settlement delays. Experimental results provide strong evidence that asymmetric information can delay settlements, increasing average time-to-settlement by as much as 90% in some treatments. This causal relationship is robustly observed across different bargaining environments. On the other hand, results do not obviously confirm all aspects of the game-theoretic explanation for this relationship. And they suggest that asymmetric information may be only one of several contributing causes of settlement delay.
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Published Version
Attachments
Online Appendix: Video Replays of Settlement Bargaining
What Structural Presumption? Reuniting Evidence and Economics on the Role of Market Concentration in Horizontal Merger Analysis, 42 Journal of Corporation Law 403 ().
Abstract
The “structural presumption” is a proposition in antitrust law standing for the typical illegality of mergers that would combine rival firms with large shares of the same market. Courts and commentators are rarely precise in their use of the word “presumption,” and there is foundational confusion about what kind of presumption this proposition actually entails. It could either be a substantive factual inference based on economic theory, or a procedural device for artificially shifting the burden of production at trial. This paper argues that the substantive inference interpretation is the better reading of caselaw and the sounder application of the laws of antitrust and evidence. By instead interpreting the structural presumption as a formal rebuttable presumption, modern merger analysis needlessly complicates the use of market concentration evidence, and may be systematically undervaluing the probative weight of this evidence. At least in this context, a formal presumption likely confers less evidentiary weight than a simple substantive inference.
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Alternative Published Version
Attachments
Presentation (February, 2015)
Probative Inference from Phenomenal Coincidence: Demystifying the Doctrine of Chances, 14 Law, Probability & Risk 27 ().
Abstract
The doctrine of chances remains a divisive rule in the law of evidence. Proponents of the doctrine argue that evidence of multiple unlikely events of a similar nature supports an objective, statistical inference of lack of accident or random chance on a particular occasion. Opponents argue that admissibility is improper because the underlying inference ultimately requires a forbidden form of character or propensity reasoning. Using formal probability modeling and simple numerical examples, this article shows that neither side is correct. Contrary to the claims of its proponents, the doctrine of chances provides no novel or independent theory of relevance. But contrary to the claims of its opponents, the doctrine of chances does not require character or propensity reasoning. An intuitive way to understand these properties is to interpret the doctrine-of-chances inference as a weak form of any inference that could be permissibly drawn if extrinsic events were simply bad acts for which culpability or intent were certain.
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Published Version
Attachments
2013 ALEA Presentation
Empowering Market Regulation of Agricultural Animal Welfare through Product Labeling, 19 Animal Law Review 391 ().
Abstract
In many western countries, rising public concern for the welfare of agricultural animals is reflected in the adoption of direct regulatory standards. The United States has taken a different path, preferring a "market regulation" approach whereby consumers express their preference for agricultural animal welfare through their consumption habits, incentivizing desired welfare practices with dollar bills and obviating the need for direct government regulation. There is, however, little evidence that consumers in the United States actually demand heightened animal welfare practices at market. This article explores the failure of market regulation and the welfare preference paradox posed by consumers who express a strong preference for improved animal welfare in theory, but who do not actually demand heightened animal welfare in practice. I argue that the failure of market regulation is due to the inability of current voluntary and nonstandard animal welfare labeling practices to clearly and credibly disclose to consumers the actual treatment of agricultural animals. As a corollary, effective market regulation of agricultural animal welfare could be empowered simply by improving animal welfare labeling practices.
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Alternative Published Version
Q & A for 2012 Bob Barker Prize in Animal Law
Water Externalities: Tragedy of the Common Canal (with C. Holt, C. Johnson, and C. Mallow), 78 Southern Economic Journal 1142 ().
Abstract
Laboratory experiments are used to investigate alternative solutions to the allocation problem of a common-pool resource with unidirectional flow. The focus is on the comparative economic efficiency of nonbinding communications, bilateral “Coasian” bargaining, allocation by auction, and allocation by exogenous usage fee. All solutions improve allocative efficiency, but communication and bilateral bargaining are not generally as effective as market allocations. An exogenously imposed optimal fee results in the greatest allocative efficiency, closely followed by an auction allocation that determines the usage fee endogenously.
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Published Version
An Experimental Study of Settlement Delay in Pretrial Bargaining with Asymmetric Information Dissertation: University of Virginia (advisors C. Holt and J. Pepper), UMI Pub. No. 3501713 ().
Abstract

In the United States legal system, tort disputes often exhibit protracted delay between injury and settlement. That is, parties to a dispute tend to agree on settlement conditions only after engaging in lengthy legal sparring and negotiation. Resources committed to settlement negotiation are large and economically inefficient. Even small reductions in average settlement delay stand to affect large reductions in socially inefficient spending.

This research contributes to the understanding of settlement delay by carefully exploring one popularly advanced hypothesis for the phenomenon: the idea that asymmetric information over the value of a potential trial verdict might help to drive persistent settlement delay. A large-scale laboratory experiment is conducted with payment-incentivized undergraduate and law school subjects. The experiment closely implements a popular model of settlement delay in which litigants attempt to negotiate settlement under asymmetric information about the value of a potential trial verdict. The experiment is designed to address two broad research questions: (i) can asymmetric information over a potential trial verdict plausibly contribute to the protracted settlement delay observed in the field, and (ii) can specific policies be identified which might mitigate the settlement delay associated with asymmetric information?

In response to the first broad research question, experimental results strongly confirm the plausibility of asymmetric information contributing to settlement delay. Starting from a baseline of symmetric information, settlement delay in the laboratory is increased by as much as 95% when subjects are exposed to a controlled information asymmetry over the value of the potential trial verdict. This observation is found strongly robust to perturbations in the underlying bargaining environment.

In response to the second broad research question, experimental results do not strongly confirm the capacity of reasonable policy changes to affect large reductions in settlement delay. Collected data fail to indicate that any explored reform policy obviously reduces average settlement delay, though estimators are sufficiently imprecise that substantial effects on average delay cannot be ruled out. Settlement delay in the laboratory is responsive to changes in bargaining costs, but does not obviously respond to changes in the distribution of damages available at trial.

Online Appendix
Settlement Bargaining Replays
Attachments
2011 Discussion-Group Presentation
Measurement Error in Criminal Justice Data (with J. Pepper and C. Petrie), in Handbook of Quantitative Criminology 353 (A. Piquero and D. Weisburd eds., Springer ).
Abstract
While accurate data are critical in understanding crime and assessing criminal justice policy, data on crime and illicit activities are invariably measured with error. In this chapter, we illustrate and evaluate several examples of measurement error in criminal justice data. Errors are evidently pervasive, systematic, frequently related to behaviors and policies of interest, and unlikely to conform to convenient textbook assumptions. Using both convolution and mixing models of the measurement error generating process, we demonstrate the effects of data error on identification and statistical inference. Even small amounts of data error can have considerable consequences. Throughout this chapter, we emphasize the value of auxiliary data and reasonable assumptions in achieving informative inferences, but caution against reliance on strong and untenable assumptions about the error generating process.
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Published Version

Select Working Papers

A Likelihood Story: The Theory of Legal Fact-Finding
Abstract
For over 50 years, courts and scholars have tried to explain fact-finding, and burdens of persuasion, in terms of the probability of the facts given the evidence. The exercise has not been a success. The problem is reliance on Bayesian posterior probabilities. Fact-finding is not about probability. It’s about likelihood. The difference is more than semantic. Where Bayesian probability asks about the probability of the facts given the evidence, likelihood asks about the probability of the evidence given the facts. And where probability formalizes the concept of personal belief, likelihood formalizes the concept of weight-of-evidence alone. Using the statistical properties of likelihoods, I show that every burden of persuasion in use today can be reduced to the same rule of likelihood reasoning. This likelihood theory of fact-finding formalizes story-based descriptions of the cognitive process of fact-finders, and illustrates the smooth progression of story-based models to heightened burdens of persuasion. It also resolves many of the paradoxes that beset the Bayesian probability theory of fact-finding, and clarifies the nature of uncertainty and appropriate form of inference in many fact-finding applications.
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SSRN Entry
Powers Without Power: Game Theory and the Nondelegation Principle
Abstract
The nondelegation principle prohibits Congress from delegating its legislative powers to other entities. The doctrinal test of this constitutional prohibition is to ask whether a statute provides an “intelligible principle” to guide and constrain delegated lawmaking authority. But the Court has never adequately explained the basis of the nondelegation principle, nor how it justifies an intelligible-principle test that today seems nearly impossible to fail. And while many theories of nondelegation have been put forth in the academic literature, few explain the prevalence of legislative delegation today, and none explain the intelligible principle test. This paper takes a novel approach to nondelegation: looking for the principle under the lens of non-cooperative game theory. The result is an intuitive theory of the nondelegation principle with attractive properties. This theory generalizes important aspects of many existing theories of nondelegation. It also provides a dynamic explanation, and partial justification, of the much maligned intelligible principle test.
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SSRN Entry
The Practice of Legal Bargaining: Economic Theory
Abstract
Economic models of bargaining processes are used as a framework for studying some of the details and complexities inherent in legal bargaining. The presentation begins with a review of the abstract concept of bargaining and the importance of bargaining in both legal theory and practice. Simple examples then track two basic models of bargaining through a wide range of economic research, combining non-technical presentations of simple axiomatic and structural theories of bargaining, empirical data on bargaining behavior, and approachable overviews of behavioral and focal-point theories of bargaining. By way of conclusion, brief commentary is provided on the application the economic approach to bargaining to the practice of settlement negotiation and the contract theory of unequal bargaining power.
Attachments
2012 Discussion-Group Presentation