Economic Analysis for Lawyers, Third Edition

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	Chapter
	The Economics Perspective: Incentives Matter
	Where the Buses Run on Time
	A.	Economic Behavior
	1.	Opportunity Costs, Economic Choices, and the Margin
	2.	Assumptions About Human Behavior
	Michael C. Jensen and William H. Meckling
	The Nature of Man
	Notes and Questions
	3.	Assumptions about Firm Behavior
	Matsushita Elec. Indus. Co. v. Zenith Radio Corp.
	Notes and Questions
	B.	Property Rights and Exchange in a Free Market Economy
	1.	An Overview of the Efficient Property Rights System
	2.	Enforcement of Property Rights
	Property Rules, Liability Rules, and Inalienability: One View of the Cathedral
	Notes and Questions
	3.	Poorly Defined Property Rights
	Garrett Hardin
	The Tragedy of the Commons
	Notes and Questions
	Wronski v. Sun Oil Co.
	Notes and Questions
	4.	Public Goods
	5.	Externalities, Property Rights, and the Coase Theorem
	Miller v. Schoene
	Fontainebleau Hotel Corp. v. Forty-Five Twenty-Five, Inc.
	Notes and Questions
	C.	Legal Analysis and the Art of Economics
	Eldred v. Ashcroft
	Notes and Questions
	D.	Game Theory
	Page v. United States
	Notes and Questions
	E.	Positive versus Normative Economic Analysis
	1.	Positive Economic Analysis and Scientific Methodology
	In Re Aluminum Phosphide Antitrust Litigation
	Notes and Questions
	2.	Efficiency and Other Normative Goals
	Chapter
	Markets and the Price System
	A.	The Law of Demand
	1.	Consumer Choice
	2.	Market Demand
	B.	The Law of Supply
	1.	The Opportunity Costs of Supply
	2.	Supply and Costs of Production
	C.	Equilibrium: Market Price and Quantity
	1.	Market Price and Quantity
	Sedmak v. Charlie’s Chevrolet, Inc.
	Notes and Questions
	2.	Market Prices and Subjective Value
	Peevyhouse v. Garland Coal & Mining Co.
	Notes and Questions
	D.	Gains From Trade: Consumer Surplus and Producer Surplus
	1.	Mutually Beneficial Exchange
	2.	Individual Self-Interest, Free Markets, and Social Welfare: The Invisible Hand
	An Inquiry into the Nature and Causes of the Wealth of Nations
	I, Pencil: My Family Tree as Told to Leonard E. Read
	Notes and Questions
	3.	Unequal Bargaining Power and the Limits of Mutually Beneficial Exchange
	a.	Unconscionability
	Williams v. Walker Thomas Furniture Co.
	Williams v. Walker Thomas Furniture Co. II
	Notes and Questions
	b.	Modification and the Pre-Existing Duty Rule
	Alaska Packers’ Association v. Domenico
	Notes and Questions
	E.	Changes in Demand and Supply
	1.	Changes in Demand
	2.	Changes in Supply
	Competitive Enterprise Institute v. National Highway Traffic Safety Admin.
	Notes and Questions
	F.	Price Controls
	1.	Price Ceilings
	M. Kraus & Bros., Inc. v. United States
	Notes and Questions
	Jones v. Star Credit Corp.
	Notes and Questions
	2.	Price Floors
	3.	The Quality of Products and Services in a Price-Controlled Market
	G.	Elasticity: The Responsiveness of Supply and Demand to a Price Change
	1.	Elasticity of Demand
	2.	Elasticity of Supply
	3.	Time and Elasticity
	4.	Tax Incidence
	H.	The Role of Prices
	The Use of Knowledge in Society
	Notes and Questions
	Chapter
	The Legislative Process and the Courts
	A.	Normative Grounds for Government Intervention
	1.	Market Failures
	a.	Information Problems
	b.	Externalities
	c.	Monopoly
	d.	Public Goods
	2.	Distributional Issues
	B.	Public Choice Economics
	Money for Nothing: Politicians, Rent Extraction, and Political Extortion
	Notes and Questions
	City of Columbia v. Omni Outdoor Advertising, Inc.
	Notes and Questions
	West Lynn Creamery, Inc. v. Healy
	Notes and Questions
	C.	The Economics of the Court System
	1.	Public Choice and the Courts
	Republican Party of Minnesota v. White
	Notes and Questions
	2.	Suit and Settlement
	Kohls v. Duthie
	Notes and Questions
	3.	The Economics of Court Procedures
	a.	Discovery
	Hagemeyer North America, Inc. v. Gateway Data Sciences Corp.
	Notes and Questions
	b.	Class Actions
	In re: Bridgestone/Firestone, Inc.
	Notes and Questions
	Lane v. Facebook, Inc.
	Notes and Questions
	4.	Arbitration
	Carbajal v. H&R Block Tax Services, Inc.
	Notes and Questions
	Chapter
	Externalities
	A.	Externalities
	1.	Negative Externalities
	Orchard View Farms, Inc. v. Martin Marietta Aluminum, Inc.
	Notes and Questions
	2.	Positive Externalities
	B.	Dealing with Externalities
	1.	The Assignment and Enforcement of Property Rights
	a.	Bargaining and the Coase Theorem
	Prah v. Maretti
	Notes and Questions
	b.	Transaction Costs
	Boomer v. Atlantic Cement Co., Inc.
	Notes and Questions
	Spur Industries, Inc. v. Del E. Webb Development Co.
	Notes and Questions
	2.	Corrective Taxes and Subsidies
	3.	Government Regulation
	a.	Direct Regulation Versus Corrective Taxes
	b.	Selling Rights to Pollute
	C.	Market Failures and Government Failures
	Markets and the Environment: Friends or Foes?
	Notes and Questions
	Chapte
	Information Costs and Transaction Costs
	A.	Asymmetric Information and Market Responses
	1.	The Market for “Lemons”
	2.	Adverse Selection and Insurance Contracts
	3.	Reputational Bonds and Other Market Mechanisms for Disclosing Information About Quality
	The Role of Market Forces in Assuring Contractual Performance
	Notes and Questions
	B.	Monitoring Contractual Performance: Agent-Principal Contracting
	C.	Opportunism: Market and Contractual Solutions
	1.	Firm-Specific Investments and the Appropriation of Quasi-Rents
	Lake River Corp. v. Carborundum Co.
	Notes and Questions
	2.	Franchising
	Corenswet, Inc. v. Amana Refrigeration, Inc.
	Transaction Cost Determinants of “Unfair” Contractual Arrangements
	Notes and Questions
	D.	Corporate Governance
	1.	Shareholder Voting and Rationally Ignorant Shareholders
	2.	Agency Costs and Owner/Manager Conflicts
	3.	The Contractual Theory of the Corporation
	a.	The Market for Corporate Control
	Notes on the Market for Corporate Control
	b.	Product Market Competition
	c.	Capital Market Competition and Capital Structure
	d.	Corporate Performance and Executive Compensation
	Kamin v. American Express Co.
	Notes and Questions
	e.	Markets for Managers
	f.	The Board of Directors
	g.	Ownership Structure
	h.	Corporate Law and Fiduciary Duties
	Jordan v. Duff and Phelps, Inc.
	Notes and Questions
	i.	Corporate Federalism
	Questions on Corporate Federalism
	j.	Corporate Federalization
	Notes and Questions on Corporate Federalization
	Chapter
	Risk
	A.	Economics of Uncertainty and Risk
	1.	Basic Probability Theory
	2.	Expected Value and Variance
	3.	Expected Utility and Risk Preference
	B.	Insurance
	1.	Demand for Insurance
	2.	Supply of Insurance
	a.	Adverse Selection
	Hall v. Continental Casualty Co.
	Notes and Questions
	b.	Moral Hazard
	Atwater Creamery Co. v. Western National Mutual Insurance Co.
	Notes and Questions
	c.	Insurer’s Duty to Settle
	Mowry v. Badger State Mutual Casualty Co.
	Notes and Questions
	3.	Self-Insurance
	C.	Risk and Market Prices
	1.	Financial Products
	The Rights of Creditors of Affiliated Corporations
	2.	Products and Services: Risk Allocation and Contract Law
	a.	Assumption of Risk
	Avram Wisna v. New York University
	Notes and Questions
	b.	The Bargaining Principle and Least-Cost Risk Avoider
	c.	The Allocation of Risk — Impracticability and Mistake
	Eastern Air Lines v. Gulf Oil Corp.
	Notes and Questions
	Wilkin v. 1st Source Bank
	Notes and Questions
	3.	Compensating Wage Differentials and Market Levels of Safety
	4.	Information, Risk, and Price Adjustments
	D.	Tort Law
	1.	Behavior Modification and Minimizing the Costs of Accidents
	United States v. Carroll Towing Co.
	Notes and Questions
	2.	Loss Spreading and Insurance
	Greenman v. Yuba Power Products, Inc.
	Notes and Questions
	The Current Insurance Crisis and Modern Tort Law
	Notes and Questions
	3.	Allocative Efficiency
	Doe v. Miles Laboratories, Inc.
	Notes and Questions
	4.	Tort Damages and Incentives
	a.	Compensatory Damages
	b.	Punitive Damages
	Mathias v. Accor Economy Lodging, Inc.
	Notes and Questions
	c.	The Collateral Source Rule
	Helfend v. Southern California Rapid Transit District
	Notes and Questions
	E.	Risk Regulation
	1.	Cost-Benefit Analysis
	UAW v. Occupational Safety & Health Administration
	Notes and Questions
	2.	Measuring Risk: All Risks Are Relative
	Corrosion Proof Fittings v. Environmental Protection Agency
	Notes and Questions
	3.	Risk versus Risk
	Competitive Enterprise Institute v. NHTSA
	4.	Risk Regulation Priorities
	5.	Political Economy of Health and Safety Regulation
	Chapter
	The Economics of Crime and Punishment
	A.	The Economics of Criminal Behavior
	1.	The Rational Choice Model
	Crime and Punishment: An Economic Approach
	2.	The Benefits and Costs from Crime
	a.	The Stigma of Criminal Activity
	b.	The Criminal’s Discount Rate
	c.	The Economic Theory of Recidivism
	d.	Economics versus Criminology
	e.	Are Criminals Really Rational?
	As Economy Dips, Arrests for Shoplifting Soar
	Notes and Questions
	B.	Empirical Studies of the Economic Model of Crime
	1.	Police
	2.	Imprisonment
	3.	Capital Punishment
	4.	Gun Laws
	5.	Income
	6.	Income Inequality
	7.	Unemployment
	Notes and Questions
	C.	The Economics of Law Enforcement
	United States v. United States Gypsum Co.
	Notes and Questions
	1.	Certainty versus Severity
	United States v. Rajat K. Gupta
	Notes and Questions
	2.	Fines versus Imprisonment
	Tate v. Short
	Notes and Questions
	3.	Extensions of the Basic Model
	An Economic Theory of the Criminal Law
	a.	Risk Preferences
	b.	Marginal Deterrence
	c.	Repeat Offenders
	Ewing v. California
	Notes and Questions
	d.	Discount Rates
	United States v. Craig
	Notes and Questions
	D.	Crime in the U.S.
	Understanding Why Crime Fell in the 1990s: Four Factors That Explain the Decline and Six That Do Not
	Notes and Questions
	Chapter V
	Labor Markets
	A.	Supply and Demand Analysis: An Overview
	1.	The Minimum Wage
	2.	Payroll Taxes
	3.	Fringe Benefits
	B.	Employers’ Behavior
	1.	The Demand for Labor
	2.	Employer Investments
	a.	Hiring
	Columbus Medical Services, LLC v. Thomas
	Notes and Questions
	b.	Training
	3.	Discrimination
	Wood v. City of San Diego
	Notes and Questions
	4.	Employment At Will
	Garcia v. Kankakee County Housing Authority
	Notes and Questions
	C.	Employees’ Behavior: The Supply of Labor
	1. 	Human Capital Investments
	O’Brien v. O’Brien
	Notes and Questions
	2. 	The Cobweb Model: Earnings Differences and the Demand for Education
	3. 	Occupational Choice and Compensating Wage Differentials
	4. 	Occupational Licensing
	In Re: Doering
	Notes and Questions
	D.	Labor Unions and Collective Bargaining
	American Steel Erectors, Inc. v. Local Union No. 7, International Association of Bridge, Structural, Ornamental & Reinforcing Iron Workers
	Notes and Questions
	Chapter
	Market Structure and Antitrust
	A.	Costs & Production
	1.	Short-Run Production
	a.	The Law of Diminishing Marginal Returns
	b.	Short-Run Costs
	c.	Changes in Costs of Production
	d.	Economies of Scale
	2.	Long-Run Production
	B. 	Market Structures
	1.	Perfect Competition
	a.	Short-Run Individual Firm Behavior: Profit Maximization
	b.	Loss Minimization: The Shut-Down Decision
	c.	The Short-Run Supply Curve
	d.	Long-Run Firm Behavior: Industry Supply
	e.	The Economic Benefits of Competition
	2.	Monopoly
	a.	Profit Maximizing Price and Quantity
	b.	Barriers to Entry
	United States v. Microsoft Corp.
	Notes and Questions
	c.	Price Discrimination
	d.	Predatory Pricing
	Matsushita Elec. Indus. Co. v. Zenith Radio Corp.
	e.	The Social Costs of Monopoly
	Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP
	Notes and Questions
	3. 	More Realistic Models of Competition: Differentiated Products Markets & Oligopoly
	a.	Competition with Differentiated Products
	Leegin Creative Leather Products, Inc. v. PSKS, Inc.
	Notes and Questions
	b.	Oligopoly
	Bell Atlantic Corporation v. Twombly
	Palmer v. BRG of Georgia
	Notes and Questions
	John M. Connor
	Global Cartels Redux: The Amino Acid Lysine Antitrust Litigation
	Notes and Questions
	Broadcast Music, Inc. v. Columbia Broadcasting System, Inc.
	Notes and Questions
	Chapte
	Principles of Valuation
	A.	Prejudgment Interest
	Gorenstein Enterprises, Inc. v. Quality Care-USA, Inc.
	Notes and Questions
	United Telecommunications, Inc. v. American Television and Communications Corp.
	B.	Discounted Present Value
	1.	The Present Value Formula
	2.	Rules of Thumb for Determining Present Value
	a.	The Perpetuity Rule
	b.	The Rule of 72
	3.	Discounting and Litigation
	a.	Determining the Relevant Future Stream of Economic Benefits
	Haugan v. Haugan
	Notes and Questions
	Diocese of Buffalo v. State of New York
	Notes and Questions
	b.	Determining the Proper Interest Rate
	Trevino v. United States
	Notes and Questions
	c.	Pulling It All Together
	O’Shea v. Riverway Towing Co.
	Notes and Questions
	C.	The Value of Life
	1.	Economic Value of Life
	Cappello v. Duncan Aircraft Sales of Florida
	Notes and Questions
	The Value of Life
	2.	The Hedonic Value of Life
	Mercado v. Ahmed
	Notes and Questions
	D.	Valuation of Close Corporations
	1.	Discounted Future Returns Approach
	Kleinwort Benson, Ltd. v. Silgan Corp.
	Notes and Questions
	2.	Approaches Using Current or Historical Data
	Central Trust Co. v. United States
	Notes and Questions
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