Economic Analysis for Lawyers

by Butler, Henry N.; Drahozal, Christopher

• ISBN13: 9781594601866
• ISBN10: 1594601860
• Edition: 2nd
• Format: Hardcover
• Copyright: 2006-01-01
• Publisher: Carolina Academic Press

Summary

The purpose of this casebook is to reach the principles of microeconomics. Economic Analysis for Lawyers presumes no prior training in economics and uses the same building block approach that is found in most microeconomics principles textbooks that are used in undergraduate economics classes. This book includes excerpted cases and other materials that illustrates the applicability of the economic principles to legal disputes and public policy issues. Fundamental principles are introduced in the first four chapters. Subsequent chapters build on these fundamentals by adding a detailed and sophisticated analysis in the general areas of monopoly, externalities, information, labor markets, risk, organizational economics, and financial economics. The result is a thorough introduction to the principles of microeconomics.If you are a professo

Author Biography

Henry N. Butler is the James Farley Professor of Economics at the George L. Argyros School of Business and Economics at Chapman University. Christopher Drahozal is a professor at the University of Kansas School of Law

Table of Contents

Table of Cases	xv
Preface to the Second Edition	xvii
Preface to the First Edition	xix
The Economics Perspective: Incentives Matter
Economic Behavior	4	(13)
Opportunity Costs, Economic Choices, and the Margin	4	(1)
Assumptions about Human Behavior	5	(1)
The Nature of Man	5	(4)
Notes and Questions	9	(2)
Assumptions about Firm Behavior	11	(1)
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.	11	(3)
Notes and Questions	14	(3)
Property Rights and Exchange in a Free Market Economy	17	(13)
An Overview of the Efficient Property Rights System	17	(2)
Enforcement of Property Rights	19	(1)
Property Rules, Liability Rules, and Inalienability: One View of the Cathedral	19	(1)
Notes and Questions	20	(1)
Poorly Defined Property Rights	20	(1)
The Tragedy of the Commons	21	(1)
Notes and Questions	21	(1)
Wronski v. Sun Oil Co.	22	(1)
Notes and Questions	23	(1)
Public Goods	24	(1)
Externalities, Property Rights, and the Coase Theorem	25	(2)
Fontainebleau Hotel Corp. v. Forty-Five Twenty-Five, Inc.	27	(2)
Notes and Questions	29	(1)
Legal Analysis and the Art of Economics	30	(7)
Eldred v. Ashcroft	31	(4)
Notes and Questions	35	(2)
Game Theory	37	(6)
Page v. United States	39	(2)
Notes and Questions	41	(2)
Positive versus Normative Economic Analysis	43	(10)
Positive Economic Analysis and Scientific Methodology	43	(1)
In Re Aluminum Phosphide Antitrust Litigation	44	(4)
Notes and Questions	48	(2)
Efficiency and Other Normative Goals	50	(3)
Markets and the Price System
The Law of Demand	53	(3)
Consumer Choice	54	(1)
Market Demand	55	(1)
The Law of Supply	56	(4)
The Opportunity Costs of Supply	56	(3)
Supply and Costs of Production	59	(1)
Equilibrium: Market Price and Quantity	60	(11)
Market Price and Quantity	61	(1)
Sedmak v. Charlie's Chevrolet, Inc.	61	(2)
Notes and Questions	63	(2)
Market Prices and Subjective Value	65	(2)
Peevyhouse v. Garland Coal & Mining Co.	67	(3)
Notes and Questions	70	(1)
Gains From Trade: Consumer Surplus and Producer Surplus	71	(14)
Mutually-Beneficial Exchange	72	(1)
Individual Self-Interest, Free Markets, and Social Welfare: The Invisible Hand	73	(1)
An Inquiry into the Nature and Causes of the Wealth of Nations	74	(1)
Notes and Questions	74	(1)
Unequal Bargaining Power and the Limits of Mutually Beneficial Exchange	75	(1)
Unconscionability	76	(1)
Williams v. Walker Thomas Furniture Co.	76	(1)
Williams v. Walker Thomas Furniture Co. II	77	(2)
Notes and Questions	79	(2)
Modification and the Pre-Existing Duty Rule	81	(1)
Alaska Packers' Association v. Domenico	81	(2)
Notes and Questions	83	(2)
Changes in Demand and Supply	85	(8)
Changes in Demand	85	(2)
Changes in Supply	87	(1)
Competitive Enterprise Institute v. National Highway Traffic Safety Admin.	88	(3)
Notes and Questions	91	(2)
Price Controls	93	(11)
Price Ceilings	94	(1)
M. Kraus & Bros., Inc. v. United States	94	(3)
Notes and Questions	97	(2)
Jones v. Star Credit Corp.	99	(2)
Notes and Questions	101	(1)
Price Floors	102	(1)
The Quality of Products and Services in a Price Controlled Market	103	(1)
Elasticity: The Responsiveness of Supply and Demand to a Price Change	104	(11)
Elasticity of Demand	104	(5)
Elasticity of Supply	109	(1)
Time and Elasticity	110	(1)
Tax Incidence	111	(4)
The Role of Prices	115	(5)
The Use of Knowledge in Society	115	(1)
Notes and Questions	116	(4)
The Legislative Process and the Courts
Normative Grounds for Government Intervention	120	(4)
Market Failures	120	(1)
Information Problems	120	(1)
Externalities	121	(1)
Monopoly	122	(1)
Public Goods	123	(1)
Distributional Issues	123	(1)
Public Choice Economics	124	(18)
Money for Nothing: Politicians, Rent Extraction, and Political Extortion	125	(3)
Notes and Questions	128	(3)
City of Columbia v. Omni Outdoor Advertising, Inc.	131	(4)
Notes and Questions	135	(2)
West Lynn Creamery, Inc. v. Healy	137	(4)
Notes and Questions	141	(1)
The Economics of the Court System	142	(33)
Public Choice and the Courts	142	(1)
Republican Party of Minnesota v. White	142	(7)
Notes and Questions	149	(2)
Suit and Settlement	151	(1)
Kohls v. Duthie	152	(3)
Notes and Questions	155	(3)
The Economics of Court Procedures	158	(1)
Discovery	158	(1)
Hagemeyer North America, Inc. v. Gateway Data Sciences Corp.	159	(3)
Notes and Questions	162	(1)
Class Actions	163	(1)
In re: Bridgestone/Firestone, Inc.	164	(2)
Notes and Questions	166	(1)
Mars Steel Corp. v. Continental Illinois National Bank & Trust Co.	167	(3)
Notes and Questions	170	(2)
Private Adjudication	172	(1)
Carbajal v. H&R Block Tax Services, Inc.	172	(1)
Notes and Questions	173	(2)
Externalities
Externalities	175	(11)
Negative Externalities	176	(2)
Orchard View Farms, Inc. v. Martin Marietta Aluminum, Inc.	178	(5)
Notes and Questions	183	(1)
Positive Externalities	184	(2)
Dealing with Externalities	186	(25)
The Assignment and Enforcement of Property Rights	186	(1)
Bargaining and the Coase Theorem	187	(1)
Prah v. Maretti	188	(6)
Notes and Questions	194	(1)
Transaction Costs	195	(2)
Boomer v. Atlantic Cement Co., Inc.	197	(4)
Notes and Questions	201	(1)
Spur Industries, Inc. v. Del E. Webb Development Co.	202	(4)
Notes and Questions	206	(1)
Corrective Taxes and Subsidies	206	(2)
Government Regulation	208	(1)
Direct Regulation v. Corrective Taxes	209	(1)
Selling Rights to Pollute	209	(2)
Market Failures and Government Failures	211	(10)
Markets and the Environment: Friends or Foes?	211	(7)
Notes and Questions	218	(3)
Information Costs and Transaction Costs
Asymmetric Information and Market Responses	221	(9)
The Market for ``Lemons''	221	(1)
Adverse Selection and Insurance Contracts	222	(1)
Reputational Bonds and Other Market Mechanisms for Disclosing Information About Quality	222	(1)
The Role of Market Forces in Assuring Contractual Performance	223	(5)
Notes and Questions	228	(2)
Monitoring Contractual Performance: Agent-Principal Contracting	230	(3)
Opportunism: Market and Contractual Solutions	233	(22)
Firm-Specific Investments and the Appropriation of Quasi-Rents	234	(1)
Lake River Corp. v. Carborundum Co.	235	(4)
Notes and Questions	239	(3)
Franchising	242	(1)
Corenswet, Inc. v. Amana Refrigeration, Inc.	243	(4)
Transaction Cost Determinants of ``Unfair'' Contractual Arrangements	247	(5)
Notes and Questions	252	(3)
Corporate Governance	255	(24)
Shareholder Voting and Rationally Ignorant Shareholders	256	(1)
Agency Costs and Owner/Manager Conflicts	257	(1)
The Contractual Theory of the Corporation	258	(1)
The Market for Corporate Control	259	(1)
Notes on the Market for Corporate Control	260	(1)
Product Market Competition	261	(1)
Capital Market Competition and Capital Structure	261	(1)
Corporate Performance and Executive Compensation	262	(1)
Kamin v. American Express Co.	263	(2)
Notes and Questions	265	(1)
Markets for Managers	266	(1)
The Board of Directors	267	(1)
Ownership Structure	267	(1)
Corporate Law and Fiduciary Duties	267	(1)
Jordan v. Duff and Phelps, Inc.	268	(6)
Notes and Questions	274	(2)
Corporate Federalism	276	(1)
Notes and Questions on Corporate Federalism	276	(1)
Enron, WorldCom, and the Sarbanes-Oxley Act of 2002	277	(2)
Risk
Economics of Uncertainty and Risk	279	(7)
Basic Probability Theory	279	(1)
Expected Value and Variance	280	(2)
Expected Utility and Risk Preference	282	(4)
Insurance	286	(15)
Demand for Insurance	286	(1)
Supply of Insurance	286	(1)
Adverse Selection	287	(1)
Hall v. Continental Casualty Co.	287	(3)
Notes and Questions	290	(1)
Moral Hazard	290	(1)
Atwater Creamery Co. v. Western National Mutual Insurance Co.	291	(3)
Notes and Questions	294	(1)
Insurer's Duty to Settle	295	(1)
Mowry v. Badger State Mutual Casualty Co.	295	(5)
Notes and Questions	300	(1)
Self-Insurance	301	(1)
Risk and Market Prices	301	(14)
Financial Products	301	(1)
The Rights of Creditors of Affiliated Corporations	302	(1)
Products and Services: Risk Allocation and Contract Law	303	(1)
Assumption of Risk	304	(1)
Molinari v. Tuskegee University	304	(2)
Notes and Questions	306	(1)
The Bargaining Principle and Least-Cost Risk Avoider	307	(1)
The Allocation of Risk---Impracticability and Mistake	307	(1)
Eastern Air Lines v. Gulf Oil Corp.	307	(2)
Notes and Questions	309	(1)
Wilkin v. 1st Source Bank	310	(2)
Notes and Questions	312	(1)
Compensating Wage Differentials and Market Levels of Safety	313	(2)
Information, Risk, and Price Adjustments	315	(1)
Tort Law	315	(36)
Behavior Modification and Minimizing the Costs of Accidents	315	(1)
United States v. Carroll Towing Co.	316	(2)
Notes and Questions	318	(5)
Loss Spreading and Insurance	323	(1)
Greenman v. Yuba Power Products, Inc.	323	(2)
Notes and Questions	325	(2)
The Current Insurance Crisis and Modern Tort Law	327	(7)
Notes and Questions	334	(2)
Allocative Efficiency	336	(1)
Doe v. Miles Laboratories, Inc.	336	(3)
Notes and Questions	339	(1)
Tort Damages and Incentives	340	(1)
Compensatory Damages	340	(1)
O'Shea v. Riverway Towing Co.	340	(1)
Punitive Damages	340	(1)
Mathias v. Accor Economy Lodging, Inc.	341	(4)
Notes and Questions	345	(2)
Collateral Source Rule	347	(1)
Helfend v. Southern California Rapid Transit District	347	(3)
Notes and Questions	350	(1)
Risk Regulation	351	(23)
Cost-Benefit Analysis	351	(1)
UAW v. Occupational Safety & Health Administration	351	(5)
Notes and Questions	356	(5)
Measuring Risk: All Risks Are Relative	361	(1)
Corrosion Proof Fittings v. Environmental Protection Agency	361	(6)
Notes and Questions	367	(1)
Risk v. Risk	368	(1)
Competitive Enterprise Institute v. NHTSA	369	(1)
Risk Regulation Priorities	369	(1)
Political Economy of Health and Safety Regulation	370	(4)
Competition and Monopoly
Costs of Production	374	(10)
Short-Run Production	374	(1)
The Law of Diminishing Marginal Returns	374	(2)
Short-Run Costs	376	(3)
Long-Run Production	379	(1)
Long-Run Costs	379	(1)
Economies, Diseconomies, and Minimum Efficient Scale	380	(2)
Changes in Costs of Production	382	(1)
Profits and the Costs of Production	383	(1)
The Competitive Market	384	(9)
Short-Run Individual Firm Behavior: Profit Maximization	384	(3)
Loss Minimization: The Shut-Down Decision	387	(1)
The Short-Run Supply Curve	388	(1)
Long-Run Firm Behavior: Industry Supply	388	(4)
The Economic Benefits of Competition	392	(1)
The Dynamic Competitive Process	393	(20)
Advertising	395	(1)
Bates v. State Bar of Arizona	395	(7)
Notes and Questions	402	(1)
Point of Sale Services	403	(1)
Continental T.V., Inc. v. GTE Sylvania, Inc.	403	(8)
Notes and Questions	411	(2)
Monopoly	413	(34)
Profit Maximizing Price and Quantity	413	(4)
The Social Costs of Monopoly	417	(1)
Deadweight Costs	417	(2)
Rent-Seeking Costs	419	(1)
Other Criticisms of Monopoly	420	(2)
Barriers to Entry	422	(1)
Collusion and Cartel Theory	422	(2)
The Quest for Monopoly Profits	424	(1)
Price Fixing	425	(1)
Goldfarb v. Virginia State Bar	425	(4)
Notes and Questions	429	(2)
Price Fixing and Intellectual Property Rights	431	(1)
Broadcast Music, Inc. v. Columbia Broadcasting System, Inc.	431	(10)
Notes and Questions	441	(1)
Price Discrimination	442	(2)
Predatory Pricing	444	(1)
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.	444	(3)
Principles of Valuation
Discounted Present Value	447	(4)
The Present Value Formula	448	(1)
Rules of Thumb for Determining Present Value	449	(2)
The Perpetuity Rule	451	(1)
The Rule of 72	451	(1)
Discounting and Litigation	451	(19)
Determining the Relevant Future Stream	452	(1)
Haugan v. Haugan	452	(4)
Notes and Questions	456	(1)
Diocese of Buffalo v. State of New York	456	(3)
Notes and Questions	459	(1)
Determining the Proper Interest Rate	460	(1)
Trevino v. United States	460	(3)
Notes and Questions	463	(2)
Pulling It All Together	465	(1)
O'Shea v. Riverway Towing Co.	465	(4)
Notes and Questions	469	(1)
The Value of Life	470	(9)
Economic Value of Life	470	(1)
Cappello v. Duncan Aircraft Sales of Florida	470	(2)
Notes and Questions	472	(1)
The Hedonic Value of Life	473	(1)
Mercado v. Ahmed	474	(4)
Notes and Questions	478	(1)
Valuation of Close Corporations	479	(20)
Discounted Future Returns Approach	481	(1)
Kleinwort Benson, Ltd. v. Silgan Corp.	481	(4)
Notes and Questions	485	(2)
Approaches Using Current or Historical Data	487	(3)
Central Trust Co. v. United States	490	(7)
Notes and Questions	497	(2)
Glossary of Economics Concepts	499	(20)
Index	519