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TILEC Work in Progress: Xiaoyu Wang

What is Law: comment on Hadfield and Weingast (2012)
10:45-11:45, M 1003

The majority of law and economics assumes that the law relies exclusively on centralized punishment. Hadfield and Weingast (2012) built a model of legal order that relies on decentralized enforcement. They model the legal order as "a system of distinctive reasoning" that supplies "a common logic for classifying behavior as wrongful or not". However, they didn't discuss any competing social order equilibria and hence missed the welfare analysis of the legal order.

Based on their setting, we construct an individual order equilibrium in which the victim dictates punishment. It achieves better deterrence at the cost of the potential wrongdoer. In terms of welfare analysis, we argue that the legal order strikes a balance between the individual order equilibrium and no-deterrence equilibrium. For the legal order equilibrium to be welfare enhancing, its decision should be accurate in a balanced way: both type I and type II errors matter.

When: 07 February 2018 10:45

End date: 07 February 2018 11:45

Where: Montesquieu building