Season's Greetings

TILEC sends its season's greetings to all readers and extends its best wishes for 2010 to all of them!
The TILEC Office will be closed from
Friday 25 December 2009 till Monday 4 January 2010.

TILEC seminar on the law and economics of settlements

Over the past decades, legal procedure has progressively lost its previous black-letter law identity and begun to attract the scholarly attention of both lawyers and economists. In particular, settlements have steadily grown into an area of ample interdisciplinary research due to complex questions of judicial economy, litigation costs and incentives for the resolution of conflicts out of the courts. On 11 December 2009, TILEC organised a seminar on this topical issue. In her presentation, Kathryn Spier (Harvard University) discussed so-called high-low agreements, whereby a defendant and a plaintiff agree before going to the court on the lowest and highest amounts of compensation to be paid irrespective of the court decision. Jonathan Masur (University of Chicago) and John Bronsteen (Loyola University of Chicago) approached the matter from a 'hedonic' perspective and discussed the effects of an individual's adaptation to physical damage on her incentives for settlement. The seminar was productive and the presentations raised many questions to be addressed by future research.

Second IIPC workshop in Tilburg

On 18 December 2009, TILEC organized its second IIPC workshop in Tilburg. The event aimed at presenting the research of the 2009 winners of a research grant competition on issues relating to Innovation, Intellectual Property and Competition (IIPC). Jens Prufer (TILEC) uncovered the rationale for the existence of so-called semi-public contests, such as business plan competitions. George Norman (Tufts University) described how in a world of "fast seconds" a patent office may want to enlarge the width of patent protection in order to foster innovation by small innovators. Elizabeth Muller (ZEW Mannheim) presented evidence about the impact of IP legal problems on firms' innovation activities. Simone Keunen (TILEC) reported about the attempts to develop a method for the detection of "patent thickets", which are said to stifle innovation by multiplying the cost for current innovators of building upon existing technology. James Prieger (Pepperdine University) explained how to approach the problem of the dramatic increase in patent applications from the point of view of congestion pricing. The meeting, organized by TILEC member Annette van Hirschfeld, proved a success, in the opinion of many attendees. Information about the 2010 IIPC competition will be posted on the TILEC website early next year

How to reconcile national regulatory autonomy with free trade?

The WTO regime aspires to walk the tightrope between progressively liberalizing world trade and preserving well-intentioned regulatory diversity. This is a difficult task for the WTO adjudicating bodies and current services disputes confirm as much, notably when it comes to origin-neutral measures which nevertheless adversely affect trade. WTO Members are currently negotiating the adoption of rules (so-called 'Disciplines on domestic regulation') which will purportedly ensure that origin-neutral measures are not unduly trade-restrictive. In a recent TILEC discussion paper, TILEC member Panagiotis Delimatsis analyses the
Disciplines with a critical eye and draws rudimentary parallels with the EU Services Directive. The author argues that the Disciplines can only be successful if they incorporate certain proxies which could be easily used by the WTO judiciary in the resolution of conflicts. Other than strengthening the rules relating to regulatory transparency, the paper proposes a 'necessity test' drawn from the GATT/WTO history, which is tailor-made to free trade in services and, therefore, is likely to gain the 'mass support' of WTO members. Absent this type of proxies, the disciplines are doomed to fail.

Selective contracting in health care

Health care costs are growing faster than national income in most countries and a fraction of population does not get access to affordable treatment. Selective contracting between insurers and health care providers is often presented as a way to meet these twin challenges. The idea is that insurance companies, which have the
incentives and means to monitor health care providers, could reduce their market power by selectively contracting with them. In a recent TILEC discussion paper, TILEC members Jan Boone and Gijsbert Zwart and co-author Michiel Bijlsma (Netherlands Bureau for Economic Policy Analysis) revisit this issue in a model where consumers can choose to remain uninsured and show that selective contracting does not only lead to positive effects. It can raise the price of uninsured care and it can lead to cheaper insurance for the wrong reason (restricted patient choice rather than cheaper inputs). The solution to these potentially anticompetitive effects is not to ban selective contracting, as the entire pattern of contractual relationships matters for determining the harmful or beneficial effects. The policy implication is instead that selective contracts should raise alarm bells if all insurers exclude a care provider with market power in the uninsured market.