An Economic Model of Fair Use

The doctrine of fair use allows limited copying of creative works based on the rationale that copyright holders would consent to such uses if bargaining were possible. This paper develops a formal model of fair use in an effort to derive the efficient legal standard for applying the doctrine. The model interprets copies and originals as differentiated products and defines fair use as a threshold separating permissible copying from infringement. The analysis highlights the role of technology in shaping the efficient standard. Discussion of several key cases illustrates the applicability of the model.Fair use, Copyright law, Technological improvement

Law, State Power, and Taxation in Islamic History

This paper studies the unique nature, institutional roots, and economic consequences of the ruler’s political power in Islamic History. An influential interest group in Islamic societies has been the legal community, whose power could range from being able to regulate the rulers to being entirely under their control. The struggle was over the provision of legal goods and services, the legal community gradually gaining control of the law in history and the rulers seeking to appropriate political power by controlling the legal community. The economic consequence of power was the ability to dictate the choice of tax bases and rates.state power, taxation, political economy, Islamic Law, legal community

Optimal Competition and Allocation of Space in Shopping Centers

This article explains why a profit-maximizing developer may include multiple, competing outlets in a shopping center. While competing outlets presumably dissipate potential profits, thereby lowering aggregate rents that the developer can extract, the presence of shopping externalities causes the developer to be interested not just in individual store profits, but also in the traffic they generate throughout the center. And since competition among identical stores increases traffic, it can create an offsetting advantage that favors multiple outlets. The article provides a theoretical analysis of this problem and illustrates its implications for tenant mix by applying the theory to the problem of filling a vacant store. The paper concludes by explicitly relating the analysis to Brueckner's (1993) model of the optimal allocation of space in shopping centers.

Legal Change: Integrating Selective Litigation, Judicial Preferences, and Precedent

The claim that the common law displays an economic logic is a centerpiece of the positive economic theory of law. A key question in this literature is whether this outcome is due to the conscious efforts of judges, or the result of invisible hand processes. This paper develops a model in which to two effects combine to determine the direction of legal change. The main conclusions are, first, that judicial bias can prevent the law from evolving toward efficiency if the fraction of judges biased against the efficient rule is large enough; and second, that precedent affects the rate of legal change but not its direction

Repair Expenses, Selling Contracts, and House Prices

This paper examines the impact of repair expenses on the selling price of a house. Using data from settlement statements, we investigate the frequency and extent to which performance of major repairs is part of the sales contract. We find that most homes are restored to a "normally maintained" state each time the home changes hands, and that the cost of bringing the home to this condition is included as part of house selling price. This implies it may be unnecessary to measure maintenance levels when using transaction data to study components of house price or to construct house price indexes.

Restructuring Agency Relationships in the Real Estate Brokerage Industry: An Economic Analysis

Recent state legislative reforms of real estate agency relationships suggest that traditional agency law and practice are not meeting the needs of the parties involved in a residential real estate purchase and sales transaction. In this article, we argue that this is due, at least in part, to the bundling of information and representation services provided by brokers. This bundling results in a tradeoff between the benefits of buyers and sellers in sharing information prior to a match, and the cost to the parties individually of revealing information during bargaining. We conclude that, from an economic perspective, effective agency reform must solve this basic conflict, perhaps by unbundling the matching and representation functions.

Voluntary approaches to environmental protection: The role of legislative threats

Recently, attention has turned to the use of voluntary agreements between regulators and polluters as an alternative to mandatory approaches based on regulation or legislation. Voluntary agreements have the potential to reduce compliance costs by allowing greater flexibility and to reduce administrative and other costs. The purpose of this paper is to provide an economic model of the use of voluntary agreements where participation is induced through a background legislative threat. The goal is to determine whether a voluntary agreement is likely to be the outcome of the interaction between regulators and polluters, and the role that the legislative threat plays in determining that outcome. We consider first a model with a single firm and then extend the analysis to consider multiple firms. In the context of the single firm, we show that a mutually beneficial voluntary agreement always exists, but that the resulting level of abatement depends on the probability that legislation will be imposed. For the case of multiple firms, we examine the potential incentives for free-riding and ask how the terms of the agreement can affect these incentives. The results suggest that an increase in the magnitude of the threat (i.e., an increase in the probability that legislation would be imposed if a voluntary agreement is not reached) will generally increase the level of abatement under a voluntary agreement, and that if the probability of legislation is large enough, a first-best level of abatement is possible (though not guaranteed). In the context of multiple firms, the potential for free-riding can reduce the likelihood that a voluntary agreement will be reached