Agency Costs in Law-Firm Selection: Are Companies Under-Spending on Counsel?

A growing body of literature examines whether corporate clients derive sufficient value from the law firms that they engage. Yet little attention has been paid to whether clients optimally select among law firms in the first place. One entry-point is to identify discrepancies in the quality of counsel selected by different corporate clients for the very same work. Using a large sample of loans, this Article finds that major U.S. public companies select lower-ranked law firms for their financing transactions than do private equity-owned companies, controlling for various deal characteristics. While some of this discrepancy can be attributed to value-maximizing behavior, agency and other information problems within public companies may distort their choice of counsel. Contrary to the thrust of existing commentary, U.S. public companies may well be spending too little on outside counsel

Simulating the conflict between reputation and profitability for online rating portals

We simulate the process of possible interactions between a set of competitive services and a set of portals that provide online rating for these services. We argue that to have a profitable business, these portals are forced to have subscribed services that are rated by the portals. To satisfy the subscribing services, we make the assumption that the portals improve the rating of a given service by one unit per transaction that involves payment. In this study we follow the 'what-if' methodology, analysing strategies that a service may choose from to select the best portal for it to subscribe to, and strategies for a portal to accept the subscription such that its reputation loss, in terms of the integrity of its ratings, is minimised. We observe that the behaviour of the simulated agents in accordance to our model is quite natural from the real-would perspective. One conclusion from the simulations is that under reasonable conditions, if most of the services and rating portals in a given industry do not accept a subscription policy similar to the one indicated above, they will lose, respectively, their ratings and reputations, and, moreover the rating portals will have problems in making a profit. Our prediction is that the modern portal-rating based economy sector will eventually evolve into a subscription process similar to the one we suggest in this study, as an alternative to a business model based purely on advertising

Managing the boundary of an 'open' project

In the past ten years, the boundaries between public and open science and commercial research efforts have become more porous. Scholars have thus more critically examined ways in which these two institutional regimes intersect. Large open source software projects have also attracted commercial collaborators and now struggle to develop code in an open public environment that still protects their communal boundaries. This research applies a dynamic social network approach to understand how one community-managed software project, Debian, developed a membership process. We examine the project's face-to-face social network over a five-year period (1997-2001) to see how changes in the social structure affected the evolution of membership mechanisms and the determination of gatekeepers. While the amount and importance of a contributor's work increased the probability that a contributor would become a gatekeeper, those more central in the social network were more likely to become gatekeepers and influence the membership process. A greater understanding of the mechanisms open projects use to manage their boundaries has critical implications for research and knowledge-producing communities operating in pluralistic, open and distributed environments.open source software; social networks; organizational design; institutional design;

The evaluation of ontologies: Editorial review vs. democratic ranking

Increasingly, the high throughput technologies used by biomedical researchers are bringing about a situation in which large bodies of data are being described using controlled structured vocabularies—also known as ontologies—in order to support the integration and analysis of this data. Annotation of data by means of ontologies is already contributing in significant ways to the cumulation of scientific knowledge and, prospectively, to the applicability of cross-domain algorithmic reasoning in support of scientific advance. This very success, however, has led to a proliferation of ontologies of varying scope and quality. We define one strategy for achieving quality assurance of ontologies—a plan of action already adopted by a large community of collaborating ontologists—which consists in subjecting ontologies to a process of peer review analogous to that which is applied to scientific journal articles

Digital Media and Youth: Unparalleled Opportunity and Unprecedented Responsibility

Part of the Volume on Digital Media, Youth, and Credibility This chapter argues that understanding credibility is particularly complex -- and consequential -- in the digital media environment, especially for youth audiences, who have both advantages and disadvantages due to their relationship with contemporary technologies and their life experience. The chapter explains what is, and what is not, new about credibility in the context of digital media, and discusses the major thrusts of current credibility concerns for scholars, educators, and youth

In the Battle for Reality: Social Documentaries in the U.S.

Provides an overview of documentaries that address social justice and democracy issues, and includes case studies of successful strategic uses of social documentaries

Convergence and Competition in Rules Governing Lawyers and Auditors

This Article examines problems (including information asymmetries, agency problems and cognitive biases) that auditors and lawyers (collectively, "gatekeepers") confront when they evaluate and respond to risk, as well as the various ways in which gatekeeper regulation addresses these problems. Then, using the analytical framework of New Institutional Economics, this Article recognizes that "optimal" solutions to gatekeeper problems are far from certain. Better solutions are thus more likely to emerge from experimenting with different rules and observing outcomes from those rules. If auditors and lawyers are governed by different rules, a jurisdiction can simultaneously experiment with two different regulatory approaches for these two professions, and then make adjustments accordingly. Private actors also can signal which rules they prefer in a particular context by choosing whether to use, or to insist that other private actors use, auditors or lawyers for a particular task. Similarly, if rules for both professions vary among jurisdictions, jurisdictions can learn not only from their own experimentation but from the experimentation of other jurisdictions with different rules. Private actors can also signal their rule preferences by choosing the jurisdiction in which they want professional services to be performed. Improvements to gatekeeper regulation should follow from the observed results of this experimentation.These purported benefits from regulatory competition could, however, be undermined if private actors are allowed unlimited choice among regulatory regimes (a "race to the bottom"). This article thus discusses the limits of regulatory competition, and mentions various strategies for reducing the likelihood of a race to the bottom. Finally, this article observes that, within a framework of controlled regulatory competition, market and social conditions may cause some rules governing auditors and lawyers to converge, as well as some rules governing both professions in the United States and Europe to converge. Profession-specific and jurisdiction-specific differences, however, will probably remain, unless experimentation and observation demonstrate that a particular rule is clearly superior across professional and/or jurisdictional boundaries.

Is Google the next Microsoft? Competition, Welfare and Regulation in Internet Search

Internet search (or perhaps more accurately `web-search') has grown exponentially over the last decade at an even more rapid rate than the Internet itself. Starting from nothing in the 1990s, today search is a multi-billion dollar business. Search engine providers such as Google and Yahoo! have become household names, and the use of a search engine, like use of the Web, is now a part of everyday life. The rapid growth of online search and its growing centrality to the ecology of the Internet raise a variety of questions for economists to answer. Why is the search engine market so concentrated and will it evolve towards monopoly? What are the implications of this concentration for different `participants' (consumers, search engines, advertisers)? Does the fact that search engines act as `information gatekeepers', determining, in effect, what can be found on the web, mean that search deserves particularly close attention from policy-makers? This paper supplies empirical and theoretical material with which to examine many of these questions. In particular, we (a) show that the already large levels of concentration are likely to continue (b) identify the consequences, negative and positive, of this outcome (c) discuss the possible regulatory interventions that policy-makers could utilize to address these