Three essays in law and economics

Abstract

The first chapter presents a model of legal interpretation in a hierarchical court. Using a two-level court in which judges have spatial preferences over doctrine, the model examines how appeals, panels, and other structural features of the court affect the incentives of judges and promote uniform interpretation of the laws. The threat of appeal has a moderating influence on judges in the lower court. When the cost of appeal is low, this effect will be stronger, but the lower court will also have less influence on the final decision. Hence, under many conditions, overall uniformity will be maximized at an intermediate cost of review. Factors that may increase the predictability of rulings on the higher court, such as panel size, may weaken the incentives toward moderation on the lower court. The second chapter analyzes judicial decision making in three-judge appellate panels. When judges are ideological but have a preference for consensus, there will be negotiation among the three judges in an effort to reach agreement. This paper constructs a model of judicial negotiation, where judges have preferences on an ideological spectrum and disutility from disagreement.

(cont.) The parameters of the negotiation model and the judges' ideological inclinations are then estimated on a data set of sex discrimination cases using maximum likelihood estimation. The results find strong evidence that judges' votes are influenced by their panel colleagues, but that this influence mostly takes the form of outvoted judges joining the majority. However, judges in the minority appear to have a small but significant effect on case outcomes. The third chapter examines the impact of liability law on firms' investments in product safety when such investments take the form of fixed costs and liability does not apply equally to competing products. Using a model with one innovative good and one competitively supplied good, the paper finds that asymmetric liability deters safety innovation when the administration of the tort system is inefficient. When inefficiencies in the tort system are small, however, incentives to develop safer products may be stronger under asymmetric liability.