This paper develops a model of the causes and consequences of misreporting of corporate performance. Misreporting in our model covers all actions, whether legal or illegal, that enable managers of firms with low value to make statements that mimic those made by firms with high value. We show...

This paper develops a model of the competition among states in providing corporate law rules. The analysis provides a full characterization of the equilibrium in this market. Competition among states is shown to produce optimal rules with respect to issues that do not have a substantial effect...

In some cases, the law permits a party that unilaterally provides a benefit to another party to recover the estimated value of this benefit. Despite calls for expanding the set of cases to which such a restitution rule applies, the law commonly applies a mutual consent rule under which a party...

This paper develops a model of the competition among states in providing corporate law rules. The analysis provides a full characterization of the equilibrium in this market. Competition among states is shown to produce optimal rules with respect to issues that do not have a substantial effect...

How can a prosecutor, who has only limited resources, credibly threaten so many defendants with costly and risky trials and extract plea bargains involving harsh sentences? Had defendants refused to settle, many of them would not have been charged or would have escaped with lenient sanctions....

Many legal rules can be interpreted as creating options. Option pricing is thus important for understanding the ex ante effects of these rules. And, recognizing that individuals, whose behavior the law aims to influence, are imperfectly rational, a behavioral option pricing model is a...

Empirical evidence suggests that lawyers and litigants are systematically optimistic with respect to the outcome at trial. Using evolutionary game theory, this article seeks to provide a theoretical explanation for the persistence of the optimism bias. The adaptive force of optimism derives from...

Public policy may influence norms and preferences. By altering the payoffs associated with different preferences, public policy may influence the distribution of these preferences in the population. Such interdependence between policy and preferences may limit (or enhance) the effectiveness of...