ALBERT

Notes: We offer a model that sheds light on the debate over whether corporate ownership concentration converges to the Berle-Means image. Our model takes into account the importance of both legal rules and firm-specific arrangements. Our analytical result is that share ownership concentration either persists or falls depending on the relative importance of these protective arrangements. In particular, our model predicts: (a) diffuse corporate ownership in nations that impose legal limits on blockholders' clout to expropriate minority shareholder rights, and (b) concentrated corporate ownership in nations that rely on asset specificity as a form of investor protection. Our empirical work suggests partial convergence toward Berle-Means diffuse share ownership. It is thereby reasonable to infer the existence of path dependent forces on ownership concentration. But this result does not preclude the possibility of functional convergence or convergence to the diffuse form of share ownership via cross-listings on the major U.S. stock exchanges that impose stringent disclosure and listing requirements. In essence, these results suggest a case for the co-existence of the preexisting path-dependency and functional-convergence stories.

Notes: This study empirically investigates whether racial and ethnic differences in police searches of stopped drivers reflect efficient enforcement or biased policing. Null hypotheses consistent with efficient enforcement are derived from alternative assumptions regarding police objectives: 1) police seek to maximize public safety, and 2) police seek to maximize the hit rate. We use both an outcomes-based non-parametric analysis and a standard benchmarking parametric approach (regression analysis). Both approaches yield the same results: law enforcement officers display both personal and police cultural bias in their propensity to search African American and Latino drivers. African American and Latino status tends to lower the guilt signal required for police suspicion. Further, white officers police differently than their African American and Latino colleagues. White officers are 73 percent of the sworn police force, conduct 88 percent of the searches, and have a hit rate of 20 percent. Latino officers are 11 percent of the sworn labor force, conduct 8 percent of the searches, and have a hit rate of 24 percent. African American officers are 15 percent of the sworn labor force, conduct 4 percent of the searches, and have a hit rate of 26 percent. The preferential treatment of white drivers by police is attenuated with increases in the fraction of racial and ethnic minority residents in the county where the stop occurred.

Notes: In this paper we assert that, if an offender can dispose of some or all of his wealth after violating the law, raising the fine up to his wealth level will induce him to dispose of his wealth, thereby increasing social cost without deterring more offenses. This suggests that the socially optimal fine should be set below the offender's maximum wealth level.

Notes: This paper investigates the evolution of competition policy decisions in the US and, particularly, in the EU, concerning mandatory access to an essential facility held by a dominant firm. Based on some recent and controversial EU antitrust decisions, we outline a comprehensive test for identifying an essential facility and consequently imposing a mandatory access obligation on dominant firms.

Notes: The popularity of the International Court of Justice (ICJ) is the subject of much controversy. This paper examines usage of the ICJ by all United Nations (UN) member states as compared with its usage by those states with the top-ten economies of the world. Five hypotheses explaining the decrease in ICJ usage by the top-ten economies are presented as follows: (1) a home-bias of judges, (2) the diversification of international tribunals, (3) changes in the composition of the cases filed, (4) the (re-)allocation of power, and (5) an increased heterogeneity of external institutions among UN member states. We find empirical evidence that an increase in UN membership has led to increased heterogeneity, which in turn has led to a decline in usage of the ICJ by the top-ten economies.

Notes: The corporate lawyer-client privilege is increasingly controversial. Courts assert that the privilege promotes corporate compliance with the law as long as it is restricted to communications in furtherance of legal advice. This article assumes the privilege increases the probability that a corporation will escape liability. Courts can apply various tests to determine whether the agent who communicated with the corporate attorney can be defined as a representative of the corporation. The most restrictive test, the "control group" test, has been rejected by most American jurisdictions, but it has recently re-emerged in the United Kingdom. The author proposes that this test motivates corporations to restructure their optimal internal decision-making processes in order to "squeeze" into the privilege. When plaintiffs are uninformed about the internal organization of a corporate defendant, even corporations that cannot squeeze into the test have an incentive to mimic the behavior of privileged corporations, and consequently pursue socially harmful actions. These findings are supported by case law from control group jurisdictions.

Notes: In a comprehensive study extending prior research, Prince and Rubin (2002) use the event study methodology, and find negative market reaction to a sample of 15 initial filings of product liability litigation and 29 other litigation events against U.S. automakers between 1973 and 1995. They conclude that the event study methodology is a useful way to measure the costs of litigation. In contrast, after examination of a new sample of 144 initial filing events and 465 other litigation events for six major automobile firms from 1985 to 2000, and after re-examining Prince and Rubin's data, we find that the market reaction to all but the most extreme and infrequent events is generally not significant. We suggest that the event study methodology may not generally be useful to study the social costs of litigation, but may be useful for unexpected abnormal litigation events where the potential liabilities (including reputation and other losses triggered by litigation) may far exceed the legal liability reserves set up by firms. We find mixed results for the market impact of litigation against a competitor. When a product liability lawsuit is first filed against a U.S. firm, the market values of the Japanese firms significantly decline. When a Japanese firm is sued for product liability, the U.S. firms register a significant increase in market value. However, these spillover results have to be interpreted with caution because of small sample sizes and possible confounding events.

Notes: This paper provides a coherent framework for classifying cases with multiple tortfeasors in relation to the efficient allocation of liability across the tortfeasors. We construct a simple model in which various tortfeasors contribute to a loss, and consider efficient liability rules under various assumptions.

Notes: We attempt to revise the inspection game used by George Tsebelis to model phenomena in criminal justice. The refinement has been conducted by disaggregating the game payoffs and then using findings from empirical studies to reconstruct the game. In contrast to Tsebelis' propositions, we find that the severity of punishment may affect the offending behavior of individuals. The result also holds for the case in which the authority initiates crime prevention programs, by providing incentives to those who do not have a criminal history. The impact of increasing the severity of punishment on reducing individuals' offending behavior is less certain than that of instigating crime prevention programs. This result holds so long as the authority does not alter the levels of enforcement.

Notes: Miller v. Schoene approved the uncompensated destruction of cedar trees that were alternate hosts to a fungus that damaged apples but not cedars. Supreme Court Justice Harlan F. Stone's opinion noted that deciding for either cedar or apple growers would amount to action by the state. Scholars have claimed that Miller marked the demise of the public/private distinction in constitutional law. This article presents historical evidence to the contrary. A widely-accepted standard--higher commercial value--commonly decided whose interests should prevail in such controversies. The analysis also shows that moral hazard explains why cedar owners were denied just compensation, which orchardists had originally been willing to tax themselves to pay. Cedar owners whose land actually gained in value when their trees were cut down nonetheless availed themselves of damages.

Notes: This paper shows that unilateral-harm contexts with role-type uncertainty can create incentives similar to bilateral-harm contexts. For this purpose, we show that the result of Dharmapala and Hoffmann (2005), namely that standard liability rules do not lead to efficient care choices by injurer and victim if precaution costs are interdependent and harm is unilateral whereas they can in the case of bilateral harm, depends on role-type certainty.

Notes: In some recent works, negligence-based liability has been severely criticized. It has been argued that negligence-based liability does not form a convincing basis for liability assignment. Causation-based liability has been proposed as an alternative basis of liability determination. Parisi and Fon (2004) have studied the efficiency properties of the causal apportionment of liability. The authors have shown that when care levels as well as activity levels of the parties affect the causation of an accident, causation based liability does not provide efficient incentives for the parties. In this paper, we assume the activity levels to be constant. Under this assumption, we have demonstrated the existence of liability rules that are efficient and at the same time `consistent' with the requirement of causation liability. In addition, it is shown that under these rules the equilibrium outcome is unique. The analysis has been undertaken in a very general framework.

Notes: Harsh sanctions are conventionally assumed to primarily benefit vulnerable targets. Contrary to this perception, this article shows that augmented sanctions often serve the less vulnerable targets. While decreasing crime, harsher sanctions also induce the police to shift enforcement efforts from more to less vulnerable victims. When this shift is substantial, augmented sanctions exacerbate--rather than reduce--the risk to vulnerable victims. Based on this insight, this article suggests several normative implications concerning the efficacy of enhanced sanctions, the importance of victims' funds, and the connection between police operations and apprehension rates.

Notes: This article develops a model in which firms may commit to disclose varying amounts of two types of information, accuracy information and agency information, and in which a regulator may also mandate disclosures. The resulting analysis provides a way to better understand the relationship between disclosure regulation and social welfare, including issues such as: how disclosure regulation can generate social welfare gains (contra Dye, 1990; Admati & Pfleiderer, 2000), why imposing disclosure requirements on only certain firms and certain information may be efficient, and why stricter mandatory disclosure requirements may be an efficient regulatory response to more robust public securities markets (contra La Porta, Lopez de Silanes, & Shleifer, 2006).

Notes: What explains the popularity of law and economics (L&E) in some academic communities and the scarcity of such scholarship in others? Many explanations have been given for the centrality of economic analysis in American legal thought and its marginality in Europe. This article examines what drives scholars to select L&E as a topic for research. It does so by implementing the methodology of many papers in the field - by assuming that regulation and incentives matter. Legal scholars face very different academic incentives in different parts of the world. In some countries, the academic standards for appointment, promotion and tenure encourage legal scholars to concentrate on L&E. In others, they strongly discourage such research. Thus, we should expect wide variation in the participation rate of legal scholars in the L&E discourse across countries. On the other hand, economists are evaluated with similar yardsticks everywhere, and thus their participation rate is likely to vary much less. The hypothesis of this paper is that academic incentives are a major factor in the level of participation in L&E scholarship. This "incentives hypothesis" is presented and then examined empirically with data gathered from the list of authors in L&E journals and the list of participants in L&E conferences. The data generally support the hypothesis. In legal academia, the incentives to focus research on L&E topics are the strongest in Israel, weaker in North America, and weakest in Europe. In fact, the data reveal that lawyers' authorship of L&E papers weighted by population is about ten times higher in Israel than in North America; while in Europe it is almost five times lower than in North America. By comparison, the weighted participation level of economists - who face relatively similar academic environments across countries - in L&E research is not significantly different across countries.

Notes: The text of a Laudatio delivered on September 16, 2006 by Professor Francesco Parisi on the occasion of the awarding of an honorary membership in the European Association of Law and Economics (EALE) to Professor Pietro Trimarchi. This was the first such honorary membership awarded by this association.

Notes: This paper develops a stylized model of international treaty formation and analyzes the different modalities with which states can become part of an international treaty according to the procedures set forth by the Vienna Convention on the Law of Treaties. We consider the rules governing accession to international treaties, distinguishing between three situations: (i) Treaties for which acceptance of a new member requires unanimous approval of the signatory states with an amendment of the original treaty agreement (closed treaties); (ii) Treaties where acceptance of a new member is made possible through approval by a majority of the existing member states (semi-open treaties); and (iii) Treaties where the original member states have agreed to leave the treaty open for accession by other states (open treaties).

Notes: Courts may determine that an offer is irrevocable due to the offeree's reasonable reliance on it. For instance, the landmark case of Drennan v. Star Paving Co. (1958) held a subcontractor's price offer to be irrevocable once it had been relied upon by the general contractor in computing his overall bid. However, a rule of implied irrevocability raises two main difficulties. First, it seems unfair to force the offeror to commit, but not the offeree. Second, from an ex ante perspective, the implied irrevocability rule seems to deter parties from submitting low-priced, unqualified offers. These concerns have led several scholars to argue for modification of the rule. This paper rationalizes the implied irrevocability rule by demonstrating that the above concerns are unfounded. We demonstrate that whereas some restrictions on the offeree's freedom to conduct bid shopping ex post (i.e., after the uncertainties are resolved) are essential in order to allow him to receive viable price offers ex ante, these restrictions need not be absolute nor legally enforced. Partial restrictions, in the form of a self-enforced Binding Range, may well suffice. The plausible existence of a self-enforced Binding Range ensures that offerors have incentives to submit irrevocable bids because they can expect to earn a profit by submitting the best offer. This paper characterizes the optimal size of the Binding Range, and explores what legal provisions should be applied when the self-enforced Binding Range is sub-optimal.

Notes: Introduction to the Twenty-Second Annual Conference of the European Association of Law and Economics, Ljubljana, Slovenia

Notes: In most countries, wireless communications rely on administrative allocation of radio spectrum. The inefficiencies associated with this centralized approach have led economists, starting with Coase in 1959, to suggest "propertyzing" radio spectrum. Critics of this approach assert that property rights impose prohibitive transaction costs and inhibit development of wireless services. Reforms enacted in Guatemala (in 1996) and El Salvador (in 1997) have largely implemented policies suggested by Coase, yielding a natural experiment. Evidence generated in the mobile telephone market suggests that these regimes are associated with relatively efficient policy outcomes, including abundant spectrum availability and a high degree of competitiveness, and with correspondingly low retail prices and high rates of output (minutes of use). Further, such markets appear to avoid high transaction costs in the public or private sectors. We conclude that these liberal reforms tend to produce results consistent with Coase's policy conjecture.

Notes: The making of the information/knowledge society has driven a flourishing body of literature on the law and economics of copyright. This paper introduces the articles collected in the following symposium, produced by a number of scholars participating in the lively worldwide community devoted to the study of the economic role of copyright law in light of current technological change. The aim of these writings as a whole is to broaden the analytical perspective and stimulate further research, thanks to a wide selection of topics related to behavioral analysis, competition policy, insurance, cultural economics and other fields.

Notes: This paper considers how the economics of intellectual property can benefit from what has been published in the area of the economics of insurance. The objective is to show that the two areas of study are sufficiently related for the insights of the latter to be relevant to the former. Since the economics of insurance is a very mature subject, while the economics of IP is much younger, it seems that there could be many valuable lessons from insurance that can be imported into IP, at least at a first degree of approximation.

Notes: The music and movie industries have recently added individual consumers as the target of the file sharing lawsuits. It is often questioned why the industries use substantial resources to fight in the courtrooms instead of making better and more affordable products. In this article, we first analyze the reasons of the industry behavior suggesting that the court strategy may be in fact more effective, at least in the short term, than it should be based on pure economic calculations. However, the empirical evidence seems to imply that lawsuits fail to send a strong signal to individuals about the society's supposedly negative attitude towards file sharing. General deterrence from the threat of being sued does not help in the end either because people are risk seeking in the face of making a decision between a certain and probable loss. In conclusion, we argue that the court strategy cannot be used to establish any social norm with a long lasting effect on individual behavior as long as the peer pressure works towards the opposite direction.

Notes: Copyright law provides an excellent case study with which to evaluate Harold Demsetz's theory of property rights. Regardless of how one feels about the relationship between property and intellectual property, it is hard to escape the fact that intellectual property rights have expanded and grown more property-like and more privatized in recent decades. In this article, I critique the undeniable Demsetzian trend in copyright law and challenge some of the fundamental premises upon which rest the normative arguments for continued privatization and propertization of intellectual resources. First, I focus on the perceived benefits of internalizing externalities, arguing that externalities do not necessarily distort incentives or, more generally, the market allocation of resources. For many externalities, there is no efficiency benefit to internalization (whether accomplished by Pigouvian taxes/subsidies or property rights). In the end, the benefits of internalization must be carefully assessed rather than assumed. The view that increasing the degree of internalization through private property rights inevitably leads to increased incentives to invest in creation or distribution is not well-established in either theory or practice. Second, I focus on the frequently-invoked solution of efficient licensing and the "logic" that property rights should be extended "into every corner in which people derive enjoyment and value...[so that] signals of consumer preference [may] trigger and direct [producers'] investments" (Goldstein, 1994). I argue that a fundamental flaw in this logic undermines the efficient licensing hypothesis. Social demand for individuals' access to and use of copyright protected works often exceeds private demand. Purchasers'/licensees' willingness to pay reflects only their private demand and does not take into account value that others might realize as a result of their use. As I explain, many uses of copyrighted works generate value for third-parties. Finally, drawing from the first two points, I argue that, from a Coasean perspective, both externalities and property rights have symmetrical and reciprocal potentials to distort the market allocation of resources. A priori and devoid of context, one cannot say that the potential distortions caused by a property right, externality, or incremental change in a property right have a net positive or negative effect on social welfare.

Notes: This paper investigates the interplay between copyright law and antitrust law in two distinct respects. We first argue that the origin of copyright seems to be rooted not only in the need to foster the production and the spread of knowledge but also in the necessity of limiting market power on the side of distributors. We then show the potential impact on market competition of the evolution of copyright as a property rule. While property rules reduce transaction costs in the standard case of bilateral monopoly over the exchange of information goods, they might increase transaction costs. When coupled with market power, a property rule enables the right holder to control uses and prices so as to implement entry deterrence strategies against potential competitors. Conversely, we argue that reversing property rules in favor of competitors or switching to liability rules for copyright may restore competitive outcomes. This conclusion brings new insights on the application of the essential facility doctrine to copyrighted works.

Notes: Over the last century, performers gradually acquired statutory protection of their economic and moral rights. These rights are not copyright in the legal sense but neighboring rights and until recently, they were mainly remuneration rights that are collectively administered. With the WPPT (WIPO Performers and Phonograms Treaty), performers now have individual exclusive rights for digital performances; this leads to the question: what has motivated this change - is it a change in the perception of the value of performer or a change brought about by the changing technology of copying or, indeed, a change that reflects different economic costs and benefits? The paper discusses the role of copyright law as an incentive to performers and asks if the economic role of the performer is so different from that of the author. The conclusion is that a complex interaction of the legal regulations, economic conditions and institutional arrangements for administering these new rights will determine the outcome.

Notes: This paper uses a strategic entry-deterrence framework to study the relationship between copying cost, and a monopolist's profit and product quality. The potential entrant is a fake-producer producing and selling identical copies of the monopolist's product. The monopolist's subgame perfect equilibrium quality and profit is either unaffected or positively affected by changes in the copying cost. Tariffs on copying devices may be an effective copyright right protection instrument. Though an increase in tariff increases the product quality and monopolist's profit, its welfare effects are ambiguous.

Notes: Copyright protection can be divided into ?ve levels: subject matter, level of abstraction, exceptions, term limit, and restricted acts. Although copyright exceptions, in particular the fair use doctrine, and term limit have been subject to signi?cant economic analyses, studies on protection and the limits of protection of subject matter, and level of abstraction in copyright are still fairly scarce. Furthermore, the dominant model for optimal copyright protection is problematic for it requires a standard-based copyright doctrine to achieve what was postulated. Since copyright doctrines in respect of protection based on the level of abstraction are more rule-based in nature, an alternative explanation is in order. In a recent article titled "Copyright as a Rule of Evidence", Douglas Lichtman (2003) hinted such an approach where evidence plays a role in explaining this set of doctrines. In this paper, we use an abstraction and a probabilistic model to explain copyright doctrines. Copyright doctrines such as the idea-expression dichotomy, the originality requirement, de minimis rule, substantiality requirement, merger doctrine, and the scènes á faire doctrine, have the effect of creating a protection divide. Doctrines such as the causal connection requirement, independent creation defence, and the objective similarity requirement, further create an inference divide. We show that the protection and inference divides are relevant in protecting the literal and non-literal dimensions in a copyrighted work. Furthermore, we ?nd that between the protection divide and the inference divide, there is a region of non-strict liability protection. All these three regions, and the related copyright doctrines, are explained by an evidence theory of minimising the risk of court error in deciding infringement cases.

Notes: Sequential innovation with actual patent infringement and uncertainty in litigation is analyzed. Comparative statics shows that within a wide range of model parameters, a basic researcher holding a patent is able to extract all of the profit facilitated by the basic innovation. The patent holder achieves this by offering a licensing contract which the subsequent innovator accepts in the shadow of paying infringement damages. It is further demonstrated that, under rather general circumstances, broader patent breadth may diminish the patent holder's incentive to innovate: that is to extract all of the profit from the subsequent innovator commercializing the innovation.

Notes: Many legal scholars believe that equity should be considered in designing legal rules. Kaplow and Shavell (1994) seriously challenged this approach. They proved that the tax transfer system is superior to legal rules in redistributing wealth. This paper reexamines their 'double distortion' claim, presenting two main arguments. The first shows that the 'double distortion' claim is not necessarily valid under welfarism. In particular, under an ex post approach to welfarism, which generally implies that society pays attention to the ex post (actual) rather than expected redistribution, the proof of the tax superiority breaks down. Secondly, and more importantly, it is proven that, in principle, tort rules can easily be designed to circumvent 'double distortion' effects. Thus, the tort system is not inherently more inefficient than the tax-transfer system in accomplishing redistribution. The paper generally concludes that although there are often no good reasons for redistribution within the legal system, theoretically and a priori it is not an inferior redistribution mechanism.

Notes: The paper deals with a bilateral accident situation in which victims have heterogeneous costs of care. With perfect information, efficient care by the injurer raises with the victim's cost. When the injurer cannot observe at all the victim's type, and this fact can be verified by Courts, first-best cannot be implemented with the use of a negligence rule based on the first-best levels of care. Second-best leads the injurer to intermediate care, and the two types of victims to choose the best response to it. We explore in particular detail the more interesting case of imperfect observation of the victim's type, characterizing the optimal solution and examining the different legal alternatives when Courts cannot verify the injurers' statements. Counterintuitively, we show that there is no difference at all between the use by Courts of a rule of complete trust and a rule of complete distrust towards the injurers' statements. We then relate the findings of the model to existing rules and doctrines in Common Law and Civil Law legal systems.

Notes: This article studies the optimal scope of negligence, considering which of the parties' precautionary measures should be included in the determination of negligence and which instead should be omitted. The analysis shows that the optimal scope of negligence balances the gains derived from improved accident prevention with the administrative costs of the system. This approach also provides insights concerning not only the notions of care and activity level and their respective boundaries, but also the choice between strict liability and negligence.

Notes: Professors Goldberg vigorously attacks the merits of the "Three Tenors" decision while emphasizing the issue of whether the challenged restraint resides within the boundaries of the firm. Professor Muris responds that the Commission's analysis is correct as a matter of law and fact, and that Professor Goldberg's call for a market power screen for all horizontal restraints ignores the legal costs of rulemaking. I take a third view of the debate. While conceding that per se rule is properly applied to "naked restraints," I show that the Commission's analysis relies on an inappropriately narrow view of the ancillary restraints doctrine in order to justify application of the per se rule. In particular, the Commission's emphasis on the timing of the restraint as well as its hostility towards PolyGram's free rider defense are not supported as a matter of law. In any event, the facts of the Three Tenors do not support the Commission's conclusion that the moratorium agreement was not ancillary to the joint venture.

Notes: World governance today is characterized by international organizations lacking democratic legitimacy and control by the citizens they claim to represent. They are also criticized for being inefficient. This leads to violent protests and to NGOs having great influence. To address these problems, we propose international governance based on the democratic idea of citizen participation: All citizens of the member countries of international organizations have the potential right to participate in the decision-making of international organizations via initiatives, referendums and recalls. In order to reduce transaction costs, a representative group of citizens is randomly selected who can actually exercise their participation rights.

Notes: Antitrust authorities often consider parallel pricing and market share stability to be clues of illegal collusion. To analyze whether this inference is correct, I develop a model of price competition with differentiated products in which demand and costs vary over time. In many cases parallel pricing does not distinguish between a competitive and a collusive outcome. However, in some cases perfect parallel pricing is compatible only with a competitive equilibrium, and therefore provides some evidence that firms did not collude. I also show that the competitive equilibrium is characterized by a higher market share stability than a collusive equilibrium.

Notes: Monetary sanctions are less effective when agents cannot afford to pay them in full. We present a simple model of a society with two types of risk averse agents, differing in terms of productivity in the legal labor market. We consider transfers from the most productive to the least productive agents, and discuss the conditions under which redistribution can reduce crime.

Notes: Buying market share occurs when firms price below the profit-maximizing price in order to gain market share, even though recoupment of lost profit is impossible. Although perceived by rivals as predatory pricing, buying-market-share pricing does not generally damage competition even when it forces efficient rivals to exit, and current predatory pricing policy yields desirable antitrust enforcement outcomes. However, buying market share can harm competition when share-based entry barriers exist and product differentiation is sufficiently weak. With weak product differentiation and share-based entry barriers, even prices set above average costs can have anticompetitive consequences.

Notes: This paper extends the law enforcement model to include court congestion. Society suffers harm from court congestion since delay affects the credibility and the reliability of the criminal justice system. The core result of the paper is that the probability of apprehension and the probability of conviction should be considered separately by the enforcement authority. Because the level of congestion is affected by the probability of apprehension only, the use of fines and conviction should be exhausted before resorting to the costlier (in terms of court congestion costs) instrument of apprehension.

Notes: We demonstrate that contingent attorney fees can play a strategic role in a model of nuisance suits. Specifically, the use of contingency fees makes the plaintiff's threat to go to trial credible. In contrast to previous economic analyses, we show that contingency fees do encourage nuisance suits.

Notes: Merger analysis is a field in which economic theory is systematically applied, day-in, day-out. Economics structures the definition of the relevant market, and then economics drives the evaluation of the likely competitive effect of the merger. Exactly which models are used by Federal Trade Commission staff would be of great interest to the stake-holder community, as would any details on how the models are applied. This paper provides those details with an in-depth study of the FTC merger review process focused on single market horizontal mergers evaluated between 1993 and 2003. Five different market models are identified with a homogeneous goods analysis (two choices) useful in about one-third of the cases and a differentiated goods analysis (three choices) relevant for the others. Unilateral effects analysis was used in slightly more than half of the cases and coordinated interaction theories in just less than half. Evidence contained in hot documents, validated customer concerns and event analyses appears to play an important role in confirming the implications of Guidelines-based theoretical models of a merger's competitive effect.

Notes: This paper discusses specific cases in financial regulation, competition law and legal rules in procurement, in light of the economic concept of the efficiency of mixed bundling as derived in our theoretical models. We assess the appropriateness of the existing rules, and also discuss whether there is a need to reform specific legal or regulatory rules in light of the efficiency discussion. We examine the U.S. legal and regulatory framework in government procurement, the offsets case, and finally we look into financial regulation in the case of bundled brokerage and soft commission arrangements on both sides of the Atlantic. The novelty of our models is that we analyze transactions mixed bundling in the cases of monopoly, monopsony and exchange. Additionally, for the cases of monopsony and exchange we consider goods of varying degrees of quality certainty. The common result is the local optimality of the bundling of transactions in terms of expected profits for the price-setting firm, and an overall increase in the level of trade in the goods bundled. In the real-life cases examined, we found that in most instances the authorities have decided that if the practice of pure bundling is present, to replace it with mixed bundling, rather than ban bundling altogether. This practice is correct, as according to our models mixed bundling is efficiency-enhancing (both in profits and in trade volumes). On the other hand, the policy implications derived from our models based on the presence of quality uncertainty suggest that allowing the bundling of dissimilar tasks is beneficial rather than damaging to trade, especially if the goods bundled are of diverse degrees of quality certainty. This is at odds with the current legal and regulation approach to bundling practices.

Notes: The judicial review of legislation can be configured in any of a number of ways. In particular this task may be concentrated in a constitutional court, or diffused among ordinary judges. Recent studies have shown that the design of judicial institutions can have important legal, social, and economic consequences for a given polity. Scholars have dwelled on the reasons that lead political actors to the choice of one model of judicial review over another, but there has been little empirical study on this choice. Here, several hypotheses as to the circumstances that lead to the establishment of constitutional courts are tested on the basis of a data set of 128 democratic constitutions. I find that the degree of political uncertainty facing politicians is an important predictor of whether or not a constitutional court will be established.

Notes: The Trojan Horse enforcement mechanism turns law-breakers into law-enforcers by entrusting them with the right to file a private suit and to collect a fine from their accomplices. Unlike leniency or state witness programs, the Trojan Horse mechanism is not dependent on an effective public enforcement agency operating in the background. It positions conspirators in a prisoner dilemma at the very first stage of their conspiracy, long before public enforcers are on their tails, thus enabling the state to decriminalize certain conspiracies. As shown in this paper, the Trojan Horse mechanism has a (comparative) advantage in asymmetric settings, such as in the employment of illegal immigrants. Whereas fines and other criminal sanctions hardly deter empty-pocket lawbreakers such as illegal immigrants, the carrot this mechanism waves might lure illegal immigrants into suing their employers and leaving the country with a prize in their pockets. Thus, it provides a more humane enforcement mechanism than the prevailing ones, and creates a strong deterrent effect on employers who consider hiring illegal immigrants.

Notes: Professor Wright mischaracterizes both the legal basis and the factual context of the FTC's Three Tenors opinion, recently affirmed by Judge Ginsburg's opinion for a unanimous panel of United States Court of Appeals for the District of Columbia Circuit. Neither opinion's legal analysis relies on the timing of the moratorium agreement. Under either opinion, the agreement to eliminate advertising and price competition would have been proscribed even had it occurred when the joint venture was formed. Moreover, the factual underpinnings of the case differ from Professor Wright's assertions. In particular, the facts demonstrate that the joint venture did not attempt to promote the combination of various three tenors products. The only coordination with the first two albums was a restriction on their discounting and advertising. There was none of the production, distribution, and promotion among the three albums normally associated with an integrated effort.

Notes: Patent law today is a complex institution in most developed economies, and the appropriate structure for patent law is hotly debated around the world. A crucial feature shared among the diverse patent systems of the industrialized world, even before the recent trend toward harmonization, is that modern patent regimes are "constitutionalized," meaning the self-restriction of executive and legislative discretion over the patent power. Given the lucrative nature of patent monopolies and the long history of granting patents as a form of patronage, the choice to confine patents within a legal framework that minimizes the potential for rent-seeking requires explanation. Why choose to constitutionalize patents? This paper answers this question by examining three salient constitutionalizing events through the lens of public choice theory-a theoretical framework all but absent in patent and innovation scholarship. Using interest-group analysis, we trace the constitutionalization of patent law from the Venetian patent statute of 1474, through the English 1624 Statute of Monopolies, to the Intellectual Property Clause of the United States Constitution. We argue that creating constitutional patent law institutions offered the opportunity to both increase the durability of the bargain between the state and the inventor and, in some cases, to limit the grant of patents to those most likely to increase the general welfare.

Notes: We present a simple model wherein a patents regime is inferior to a trade secrets system, meaning that when private returns from innovation under the two regimes are the same, society will be better off if the innovator chooses not to patent. In our model, trade secret licensing is envisaged and the inferiority of patents depends on the lack of an independent invention defense in patent law, while such a defense currently exists in secrecy and copyright law. Thus, although secrecy is superior to patents, it is not superior to other types of formal intellectual property rights where independent invention is allowed (such as copyrighted software).

Notes: In recent years, new articles presenting rigorous analyses of bargaining incentives have overturned some of the fundamental claims made by Calabresi and Melamed in their seminal article on property rules and liability rules published in 1972. In particular, the proposition that property rules are socially preferable to liability rules when transaction costs are low appears to be either no longer valid or severely weakened under the new analyses. This paper reexamines the property rule versus liability rule question in light of the contributions of the recent bargaining theory literature. In contrast to this literature, I find that the fundamental propositions of Calabresi-Melamed remain valid, and I extend the framework to provide a more detailed positive economic theory of common law rules. The key contribution of this paper is pointing out the importance of subjective valuations in the analysis of property and liability rules. This allows for a synthesis of Calabresi-Melamed and the bargaining theory literature within an expanded framework.

Notes: This article derives key variables in the analysis of standards of proof in criminal law from basic conditional probabilities. The variables derived are the probability of correct and wrongful conviction, the expected sanction, and society's incarceration costs, while the basic conditional probabilities are the probability of observing (any given) evidence against individual i given that individual j committed the crime (for any j including j equal to i. The variables are derived from the conditional probabilities as a function of the standard of the proof using simple Bayesian updating.

Notes: Economic models of negligence ordinarily involve a single standard of care that all injurers must meet in order to avoid liability. When injurers differ in their costs of care, however, this leads to distortions in their care choices. This paper derives the characteristics of a generalized negligence rule that induces injurers to self-select their optimal care levels. The principal features of the rule are (1) the due standard of care is maximal, and (2) liability increases gradually as injurers depart further from this standard. The results are broadly consistent with the gradation in liability under certain causation rules and under comparative negligence.

Notes: In some areas of the United States, racial and ethnic minorities have been effectively excluded from the democratic process by a variety of means, including electoral laws. In some instances, the Courts have sought to remedy this problem by imposing alternative voting methods, such as cumulative voting. I examine several voting methods with regard to their sensitivity to rent-seeking. Methods which are less sensitive to rent-seeking are preferred because they involve less social waste, and are less likely to be co-opted by special interest groups. I find that proportional representation methods, rather than semi-proportional ones, such as cumulative voting, are relatively insensitive to rent-seeking efforts, and thus preferable. I also suggest that an even less sensitive method, the proportional lottery, may be appropriate for use within deliberative bodies, where proportional representation is inapplicable and minority vote dilution otherwise remains an intractable problem.

Notes: In this paper we analyze the necessity of an appeals process in private-civil litigation from the point of view of potential litigants. Our main concern is the question of whether the existence of an appeals system is to the benefit of potential litigants or if they would be better off in a system in which appeals are not possible. Our main observation is that it is unnecessary to enable appeals in all civil litigation. Indeed, a judicial system with a built-in appeals process is in many cases less desirable for the parties involved.

Notes: The paper argues that society should vary the sanction applied to a criminal defendant with the weight of the evidence against him or her. This is optimal when it is costly for society to apply sanctions, since it can yield the same degree of deterrence while requiring fewer resources to be spent on sanctioning. Furthermore, when the unfairness of convicting an innocent defendant increases with the size of the sanction, this provides a further rationale for graduating sanctions with the probability of guilt. Some objections are briefly discussed, mainly that it is inherently unfair to apply different sanctions on people, who have committed the same offense, and that the legal system will lose legitimacy if it allows sanctions to vary in the way suggested.

Notes: This article illustrates how contracts are completed ex post in practice and, in so doing, indirectly suggests what the real function of contracts may be. Our evidence comes from the contracts between automobile manufacturers and their dealers in 23 dealership networks in Spain. Franchising dominates automobile distribution because of the need to decentralize pricing and control of service decisions. It motivates local managers to undertake these activities at minimum cost for the manufacturer. However, it creates incentive conflicts, both between manufacturers and dealers and among dealers themselves, concerning the level of sales and service provided. It also holds potential for expropriation of specific investments. Contracts deal with these conflicts by restricting dealers' decision rights and granting manufacturers extensive completion, monitoring and enforcement powers. The main mechanism that may prevent abuse of these powers is the manufacturers' reputational capital.

Notes: This paper develops a framework to study the effects of the durability of legal allocation decisions, such as trial outcomes, regulatory enactments and property entitlements. For a party favored by the legal allocation, a more durable decision is also more costly to secure, ex-ante. Thus, it is not the greater durability of the allocation that determines whether the "winner" is better-off, but other factors that are affected by the durability attribute, such as the cost of securing a favorable outcome and the ability of contesting parties to affect this cost. The paper develops conditions under which greater durability is irrelevant, or even undesirable to the winner. The analysis is applied to shed light on durability doctrines relating to trial outcomes (e.g., res judicata and double jeopardy), rules and regulations (e.g., transition relief when rules change), entitlements (e.g., adverse possession and statutes of limitations), and marriages.

Notes: This paper examines a particular type of contracts that is, sadly, increasingly frequent: the agreements produced by divorcing couples. They are unhappy contracts, agreements produced as a necessary part of exit from what is now suboptimal marriage. They are virtually required by many states and are, in theory at least, closely monitored by courts since, when children are involved, they will be incorporated into court orders. What parties to unhappy contracts do is attempt to minimize losses, rather than maximize gain. How are contracts structured that will do this, and how does a difference in the size or power of the bargaining entities change the final settlement or contracting result? Because they are for more than one year, they also must be analyzed as relational contracts. This empirical study not only considers how the contractual terms come to be, but also what effect they have over a five year period, with an eye to seeing which contracts produce (or are at least consistent with) further litigation and which correspond with adjustment over time. The role of lawyers in the entire process is also a focus of the inquiry. Special attention is also paid to the role of fault, with surprising results in a no-fault system. All the divorce stipulations for parents of minor children that were filed in Johnson County, Iowa, during 1998 provide the beginning data, which is supplemented by other court records in each case.

Notes: In the "Three Tenors" case the FTC found an agreement to be an antitrust violation despite the fact that there was no way it could be anticompetitive. The Commission failed to heed the lessons of Coase's classic paper on the nature of the firm, making a sharp distinction between activities within a firm (legal) and across firm boundaries (not legal). Analytically, there should be no distinction. The decision to integrate activities by contract rather than ownership is a matter of relative transactions costs. Since the boundaries of the firm are, ultimately, an economic decision reflecting the costs and benefits of the alternative arrangements, there is no economic justification for making the legality of any act contingent upon whether it was on the proper side of that boundary. Nor is there any particular virtue in using antitrust rules to alter the relative costs so as to shift that boundary to favor bringing activities within the firm. The paper proposes a "quick look" approach. The first thing to look for is some indication of market power. If antitrust harm is not credible, as in this case, because there was no market power, stop looking.

Notes: This Article attempts to explain the views about business of Brandeis and Holmes. The Article analyses why their economic thinking differed as it did; to what extent it comports with a modern understanding of economics; and how Holmes and Brandeis could have been such close allies when their economic theories differed as fundamentally as they did. Finally, the Article addresses the consequences and current significance of, if any, the theories of Brandeis and Holmes, with particular though not exclusive reference on the one hand to antitrust law and on the other hand to the current crisis of corporate governance.

Notes: A feature of many penal codes is that punishments are more severe for repeat offenders, yet economic models have had a hard time providing a theoretical justification for this practice. This paper offers an explanation based on the wage penalty suffered by individuals convicted of crime. While this penalty probably deters some first-timers from committing crimes, it actually hampers deterrence of repeat offenders because of their diminished employment opportunities. We show that in this setting, an escalating penalty scheme is optimal and time consistent.

Notes: In ignoring the facts of the Three Tenors case and the transactions costs of legal rulemaking, Professor Goldberg would unnecessarily complicate antitrust law to the detriment of consumers. Contrary to his assertions, the FTC's opinion does not favor ownership over contract. The parties could have chosen to coordinate Three Tenors products and promote a "brand," but they did not. Indeed, their contract explicitly provided otherwise. For a small class of cases - in which the parties restrain basic forms of competition such as price or advertising without a legitimate claim of consumer benefit - antitrust law avoids the costs of finding market power. In any event, the facts of the Three Tenors case provide a natural experiment revealing that the agreement the Commission proscribed in fact harmed consumers.

Notes: Firms can "rent" the securities laws in other countries by listing or selling securities there while remaining subject to local law. Firms thereby can reduce their cost of capital despite political and other impediments to strong securities laws in their home countries. The cross-listing market has implications for both cross-listing jurisdictions and the home jurisdictions of cross-listing firms. From the standpoint of home countries, firms' flight to other markets may result in political pressure to adopt laws similar to those in the cross-listing countries. However, this pressure is unlikely to cause convergence of international corporate laws. To the extent divergence persists, cross-listing firms' costs of complying with the internal governance law of cross-listing jurisdictions may exceed the benefits of cross-listing. In order to avoid reducing cross-listings, cross-listing jurisdictions have an incentive to exempt foreign firms from their internal governance law or to avoid regulating internal governance. This has important implications for expanding US federal regulation of internal governance: Just as the federal government is Delaware's competition, so the international market for cross-listings is Washington's competition.

Notes: All politicians, regardless of the nominal form of government within which they operate, face the trade-off between current period gains and tenure extension. That is, rulers can exploit their power for personal gain, but they risk being removed from their positions of power, either through a popular vote or a coup or revolution. If they temper their exploitation to remain in power, they sacrifice some of their current personal gain. Essentially all politicians are limited autocrats, where the limitations imposed on them differ according to the institutional structure under which they rule. This paper presents a formal model of this trade off in the Mancur Olson stationary bandit framework, where tenure length is explicitly endogenized in the politician's maximization problem.

Notes: 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 potentially helpful tool for legal policy. This paper develops such a model and applies it to a series of legal problems in tort law, contract law, corporate law and criminal law.

Notes: Many of the world's banks have operations, if not branches or agencies, in the United States. When these banks fail, their U.S. operations and assets are subject to a confused, and confusing, patchwork of insolvency laws, both federal and state. This essay examines that legal patchwork, asking whether it is desirable, much less efficient, for a nation to have an inconsistent foreign-bank insolvency regime. The essay does not attempt to provide final answers but, instead, focuses on identifying the threshold conceptual issues that must be resolved before attempting to provide answers.

Notes: This paper presents a model of penalties that reconciles the conflicting accounts of optimal punishment by Becker, who argued penalties should internalize social costs, and Posner, who suggested penalties should completely deter offenses. The model delivers specific recommendations as to when penalties should be set to internalize social costs and when they should be set to completely deter offensive conduct. One basic recommendation is that whenever the cost of transacting with respect to some entitlement is less than the cost of enforcing the right to that entitlement, penalties should be set to completely deter. I use the model to generate a positive account of the function and scope of criminal law doctrines, such as intent, necessity, and rules governing the distinction between torts and crimes. The model is also consistent with the history of criminal penalties set out by Adam Smith.

Notes: Shows how international standards and codes are increasingly addressing the integrity underpinnings of the international financial system, focusing on evolving standards for preventing money laundering, and relates these to the work of the International Monetary Fund's Monetary and Financial Systems Department. Lists these reference points as: the revised 2003 Basel FATF 40 Recommendations; the Basel, IOSCO and IAIS Core Principles and the revised Basel Capital Accord or Basel II; the Sarbanes-Oxley Act in the USA; the OECD Principles of Corporate Governance; and recent UK legislation - the Financial Services Act 2000 and the Proceeds of Crime Act 2002. Outlines recent developments in each of these laws and codes as they affect the banking system.

Notes: Outlines the requirements of the PATRIOT Act of October 2001; together with subsequent legislation, it has led to a dramatic increase in surveillance activities affecting both traditional financial institutions and the newer types known as Money Service Businesses. Lists its demands, that all financial institutions: establish a more formal anti-money laundering programme with a compliance officer, implement an employee training programme, file Suspicious Activity Reports, verify new customers' identities etc. Indicates the cost to the financial services industry of compliance. Concludes that, given the massive quantities of information collected, even the best technology may not ensure that the tiny minority of terrorist traces actually get followed up

Notes: Begins by putting Malta into perspective as one of the ten states that joined the European Union in 2004 and the one with the smallest area; its geographical position at the crossroads of the Mediterranean Sea makes it a target for drugs dealing, smuggling and illegal immigration. Describes the Malta Stock Exchange, and its role in anti-money laundering. Outlines the Prevention of Money Laundering Act and the work of the Financial Intelligence Analysis Unit (FIAU), a government agency charged with combating money laundering; among its duties of managing relevant information, it receives reports of suspicious money laundering transactions. Indicates the international affiliations of the FIAU with similar bodies. Concludes that Malta has acted swiftly in combating terrorist financing and money laundering.

Notes: Outlines the Recommendations of the Financial Action Task Force (FATF) Anti-Money Laundering Recommendations, which go well beyond the 1996 version: they are prescriptive and detailed, and they expand reporting bodies to many non-financial businesses, focusing on the high-risk areas of customer due diligence and establishing cross-border correspondent banking relationships. Describes the Attorney General's response. Indicates the problems for Australia's compliance with the Recommendations: lack of control of over small businesses and over amateur sleuths who have access to personal details, implementation of a risk-based system; developing a an identification system acceptable to Australians that does not make identity theft even easier, and the fact that the system is so complicated and costly that non-compliance becomes a big issue.

Notes: Focuses mainly on how China's State Administration of Foreign Exchange (SAFE) monitors cross-border capital flows and, since 2003, is mandated to combat transnational money laundering. Outlines other legislation since the 1990s which is aimed at preventing money laundering. Discusses the practical aspects of anti-money laundering in China, and international cooperation in the form of training and technical assistance. Indicates the achievements of SAFE in uncovering important cases involving underground money houses and illegal foreign exchange transactions; 65 cases of violation of foreign exchange regulations have been dealt with by SAFE between March 2003 and September 2004, while many more cases have been transferred to the public security departments.

Notes: Distinguishes between the two normal methods of reporting suspected cases of money laundering to the authorities, usually a financial intelligence unit (FIU): a suspicious transaction report (STR) or a cash transaction report (CTR), the latter occurring when the amount of cash exceeds the threshold figure. Points out problems in CTR, mainly that it is only relevant at the placement stage of money laundering. Considers a system of threshold transaction disclosures as a possible compromise; this would cover all transactions over the threshold, not just cash. Suggests an "access on demand" system as a hybrid variety of threshold reporting. Concludes that threshold disclosure can be an effective low-cost solution to the evolving practice of money laundering.

Notes: Describes how African, Asian and Latin American elites - whether politicians, civil servants or businessmen - oppress and exploit their peasant populations by extorting commissions on foreign loan contracts and depositing the money in overseas banks; it is estimated that $20 billion leaves Africa in this way each year. Lists, alphabetically by country, examples of corruption in Africa; there are shorter lists for Asia and Latin America. Goes on to questions of how do those in power steal this wealth, why do they steal so much and with such impunity, and where do they hide it. Discusses the consequences of corruption, how international banking institutions should continue to freeze and publicise these accounts, and recommends ways that the international community could attack the corruption problem.

Notes: Discusses the impact of regulatory and enforcement action on banking and financial services, focusing on Switzerland, which is one of the most developed financial centres. Describes the recent increase in legislation which introduces corporate criminal liability, plus the far-reaching Money Laundering Ordinance with its stronger due diligence requirements. Points out that in the field of financial services, liberalisation and globalisation have been met with more rather than less regulation. Concludes that, while greater regulation can be viewed as a reasonable price to pay for globalised financial services, the over-regulation of Swiss financial services needs to be rationalised.

Notes: Describes the four main international regulatory standard setters: the Basel Committee for Banking Supervision, the Financial Action Task Force on Money Laundering (FATF), the International Association of Insurance Supervisors (IAIS) and the International Organization of Securities Commissions (IOSCO). Considers what these regulatory associations are doing in the context of the globalisation of business using the internet and information technology. Discusses issues covered by the organizations at a recent International Monetary Fund (IMF) conference: this covered barriers to cooperation between supervisors and how the IMF could help the international trendsetters improve this cooperation.

Notes: Illustrates the formidable obstacles facing an attorney who acts as a financial intermediary in US narcotics and other cases where forfeiture charges may be brought. Summarises the lengthy history of two cases in the 1990s involving a renowned US attorney, F. Lee Bailey; in the one case he acted as a financial intermediary during a criminal proceeding and in the second simply sought to be compensated for legal services rendered. Recounts how the decisions in Florida and Massachusetts resulted in his being held in contempt of court and effectively ended his career; one of them led to his imprisonment.

Notes: Defines dumping as the sale of goods onto the market of an importing country at less than their normal value on the domestic market, and explains the economic rationale behind dumping. Reviews the origin of anti-dumping laws, and the objectives of applying anti-dumping duty legislation to non-market economy countries, with reference to European Union (EU) anti-dumping measures against China; the latter is still viewed as a non-market economy. Indicates the impact of the EU anti-dumping campaign on Chinese industries and legal strategies for challenging the EU anti-dumping campaign. Concludes that the campaign is unfair and should now recognise the progress of economic reform in China, which since 2001 is a member of the World Trade Organization.

Notes: Shows how terrorists finance their operations from crimes like immigration benefit fraud, cigarette smuggling, kidnapping and drug trafficking, and also petty crimes like benefit card theft, identity theft and welfare benefit fraud; this is especially easy if they avoid the banking system and use a cheque cashing business. Concludes that legislators and regulators need to plug gaps in existing anti-money laundering legislation, by regulating cheque cashers more aggressively and enlisting help from traditional banks; banks should identify individuals making cash deposits into bank accounts, identify money transmitter clients, and close accounts of clients who are not licensed; and law enforcement agencies should look more strategically at Suspicious Activity Reports filed by banks.

Notes: Outlines new legislation against money laundering: 2002 was a very active year which saw the Law on Combating International Terrorism, the Fourth Act on the Advancement of the Financial Market, and the Law on Combating Money Laundering and International Terrorism. Shows how these add new duties to existing obligations to identify customers, store the details and notify the authorities of possible money laundering, and they also widen the group of professions subject to these obligations. Discusses the duties of professionals dealing with assets: identification duties, recording duties, reporting duties, and structural duties. Describes criminal liability in cases of non-compliance with reporting duties or being in breach of private secrets; administrative liability; and liability of obliged persons by civil law. Concludes that in fact the new liability is generally limited to grossly negligent and intentional behaviour.

Notes: Describes the impact of technology on intelligence, which means that vast amounts of data can now be stored, accessed and securely sent and received. Shows how intelligence-led policing combines with suspicious activity reports (SARs) and cash transaction reports (CTRs); it is the basis of the UK's National Intelligence Model, which is charged with ensuring that information is fully processed. Describes Australian case studies which illustrate the proactive use of information technology and intelligence in law enforcement; they feature the Australian Transactions Reports and Analysis Centre (AUSTRAC) and its use of data mining and wire transfer monitoring.

Notes: Traces the history of the important obligation of financial systems and other vulnerable professions to report any suspicious transactions in order to combat money laundering. Contrasts the 1988 Statement of Principle of the Basel Committee on Banking Regulations and Supervisory Practices, which did not oblige banks to report suspicious transactions (reflecting the then deeply rooted concept of bank secrecy) with the 10 June 1991 EC Council Directive, which stipulates mandatory reporting. Shows how the institutions mandated to report suspicious transactions have widened out from banks to non-bank financial institutions, and thence to non-financial institutions. Outlines criteria for suspicious transactions, the work of Financial Intelligence Units, and implementation of suspicious transactions reporting in some European Union countries.

Notes: Presents a basic model by which a representative agent chooses how to allocate his savings optimally between money of legal origin and dirty money; he holds the laundered dirty money, from which the money laundering process generates a positive transaction cost. Analyses the welfare of such an economy as a result of money laundering, also the conditions for reducing the incentives for this transforming of illegal into legal money: the incentive can be minimised if the effectiveness of anti-money laundering increases. Concludes that the welfare of an economy where there is only legal money is greater than one in which legal and illegal activities coexist.

Notes: Describes some aspects of money laundering through the lens of systems terminology. Claims that this approach can give insights beyond those of the conventional "linear" methodologies, and gives the American dominance of the Financial Action Task Force as an example. Sees money laundering and anti-money laundering as coupled activities, subsystems each of which stimulates the other to expand its own powers within its particular domain, so that the harder that anti-money laundering pushes, money laundering pushes back. Relates this to how the suspicious transaction reporting system works in the Greek context and recommends improvements. Argues that anti-money laundering is not a "solution" to the "problem" of money laundering, and that there can be no solution: money laundering is as old as money itself.

Notes: Analyses from a banking regulation perspective the general experience of 23 countries that were initially listed as non-cooperative countries and territories (NCCTs); this group did not meet some or most of the 25 criteria developed by the Financial Action Task Force (FATF) on money laundering and based on 40 recommendations setting out the anti-money laundering framework. Highlights the 25 criteria, shows the ones missed by each of the 23 countries, discusses how de-listed countries successfully addressed these criteria through further bank regulation, and concludes with a detailed application to the path taken by one of the countries, Lebanon.

Notes: Uses examples from US case law to illustrate how money laundering has been attempted in the past. Details a large number of specific methods: cash couriers, cash conversion, safe deposit facilities, credit cards, foreign bank accounts, alternative or parallel remittance systems, trusts, precious metal and gems, art and antiques, expensive lifestyles, fictitious loans, real property, cars, boats and planes, stocks and bonds, bearer bonds, casinos, negotiable instruments, cash for cheque exchanges, business, investment funds, non-profit organisations, shell corporations, and working capital for a criminal enterprise. Also indicates the factors influencing choice of money laundering methods: the amount of money to be laundered, the availability of professional services from people willing to be involved, the scope for intimidation or corruption of professionals, and so on.

Notes: Analyses where the auditors and regulators went wrong in the attempting to prevent the collapse of the Bank of Credit and Commerce International (BCCI) in 1991; the Bank was dogged by rumours of money laundering and dubious practices, and the result was the loss of many jobs and bank deposits. Looks at the roles of Price-WaterhouseCoopers, who became sole auditors of BCCI in 1988, and of previous auditors Ernst & Young. Criticises the regulatory performance of the Bank of England, in particular the lack of communication between it and Price-WaterhouseCoopers. Suggests that an independent banking regulator is needed in the UK based on a new statutory regulatory structure, and that the 1987 Banking Act may have prevented the Bank of England achieving effective regulation.

Notes: Considers evidence of the costs and benefits of money laundering compliance activity within the UK, in light of the fact that despite the UK's particularly assiduous compliance, it remains on the list of identified money laundering countries. Outlines the evidence for the existence of money laundering in the UK: £25 billion is a possibly realistic figure for the amount actually laundered, a figure which is less than 1% of total funds handled by the financial system, although some funds appear to be going into property and other avenues which avoid the banking system. Compares the likely costs and benefits of regulation compliance, which is notoriously difficult. Concludes that the costs of compliance are not negligible, and that there is a need to understand more clearly both the objectives of legislation and the amount of money laundering activity taking place.

Notes: Examines the relationship between two recent developments in regulation and supervision of banking, financial and insurance markets: unification of supervision, and the establishment of financial intelligence units (FIUs) in many countries. Analyses FIUs, using a Financial Authorities Concentration Index to measure concentration of supervisory powers, and an alphabetical listing by 68 countries of their supervisory authorities. Asks whether creation of FIUs could be an obstacle to consolidation of supervision, with a tradeoff between the two. Lists by country its FIU's title, type of institutional model (administrative, judicial or law enforcement) and the principal official concerned. Concludes that the creation of FIUs has so far not caused friction with the current consolidation process of financial supervision.

Notes: Describes how the 1986 Financial Services Act gives the FSA power to pursue not only those breaching its rules but others who become involved in breaches by being "knowingly concerned"; the FSA can apply to the courts for an injunction or for a restitution order, and if the person is in fact a bank it has a new extra-judicial power to make it disgorge the profits and/or compensate for the loss. Explains at length what "knowingly concerned" means in the context of the criminal and civil law. Shows how banks are now under significant obligation to obtain information about their clients, and this results in knowledge for the purpose of "knowingly concerned" liability; they also have to report suspicions of money laundering and generally cooperate with the FSA.

Notes: Raises the problem for a bank asked by a third party to freeze the funds of a customer, with special reference to New Zealand; the bank faces liability whichever decision it makes. Mentions the Royal Brunei Airlines and Twinsectra cases, and details a case study (US International Marketing Ltd v National Bank of New Zealand) where the bank refused to transfer a customer's funds because of a third party request; the customer's appeal was upheld. Concludes that banks must have "sufficient factual foundation" before they can refuse to comply with a customer's request for a transfer of funds.

Notes: Discusses the use of economic sanctions against terrorism and organised crime. Focuses on the low evidentiary threshold adopted by the United Nations Security Council's Resolution 1267 to freeze the assets of those associated with al-Qaeda, with the result that some individuals and organisations have found themselves unjustifiably subject to sanctions like frozen assets or travel bans. Considers what is needed to strike the right balance between effectiveness in combating terrorism and protection of individual rights of alleged terrorists, concluding that a satisfactory level of evidence and a proper legal defence are necessary principles.

Notes: Introduces the UK's Serious Organised Crime Agency (SOCA), which was set up in February 2004 and aims to reduce the profit incentive on serious crimes, disrupt criminal enterprises and increase the risks to criminals; it will be advised by specialist prosecutors. Outlines the contents of "One Step Ahead", the Home Office consultation paper, which expects much more from the specialist prosecutors than presently is provided by the Crown Prosecution Service (CPS). Anticipates that the specialist prosecutors advising SOCA will run into problems similar to those currently facing the CPS whenever covert intelligence has been obtained, and recommends measures such as the employment of telephone intercepts as a source of evidence.

Notes: Examines in detail the various international, legal, policy and institutional principles to deal with money laundering and corruption. Begins with the many United Nations (UN) initiatives: the 1988 Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 2000 Convention against Transnational Organised Crime, Convention against Corruption, Convention for the Suppression of the Financing of Terrorism, Global Programme against Money Laundering, Global Programme against Corruption, Global Programme against Terrorism, Global Programme against Transnational Organised Crime, and Global Programme against Trafficking in Human Beings. Moves on to the Financial Action Task Force on Money Laundering, the Asia/Pacific Group on Money Laundering, the Inter-governmental Action Group against Money Laundering in West Africa, the Egmont Group, Interpol, Organisation for Economic Cooperation and Development (OECD) initiatives, Basel Declarations, Council of Europe Convention/Directives, Europol, the African Union Convention on Preventing and Combating Corruption, Transparency International, and the Wolfsberg Initiative.

Notes: Describes transnational terrorist groups in the Asia-Pacific region. Outlines the general problems facing cooperation within the East Asia and Oceania region because of its huge size and diversity, and explores regional cooperation in dealing with these criminal and terrorist networks; the Australian government has taken a leading role in combating both, although it has incurred distrust because of its close alliance with the USA. Contends that in fact there has been real progress in regional cooperation, especially if it is considered that awareness of the concept of transnational crime and terrorism was alien to the region until the mid-1990s; and further, the notion of intervening to assist a disrupted state would not have been countenanced a decade ago. Outlines two specific initiatives involving regional intervention in the Solomon Islands and Papua New Guinea.

Notes: Examines how the Royal Canadian Mounted Police (RCMP) successfully implemented a tailor-made Human Resources (HR) management regime with fresh definitions of competences for the new Integrated Market Enforcement Teams (IMETs). Explains that the intention was to increase competences for investigation of white-collar crime in the wake of corporate scandals in the USA, and thus to restore investor confidence in Canada's capital market. Details the IMET pilot project, including selection of personnel from the RCMP for the six IMETs. Concludes that the new HR regime clearly has the ability to change how people are managed in the investigation field.

Notes: Examines the continuing obligations regime imposed on listed public companies via the United Kingdom Listing Authority's Listing Rules, and how far this protects a company's shareholders against, for instance, financial misconduct by the company directors. Discusses each of the obligations: disclosure of information, regulation of transactions (including reverse takeovers and related-party transactions), production of credible financial information, communications with shareholders, directors, and buy-back of shares. Concludes that the regime is desirable, but there is need to maintain the balance between protection of investors and public without discouraging companies from going public and seeking listing.

Notes: Discusses how important perceptions of tax fairness can be in forming tax-compliant behaviour in various jurisdictions, based on a crosscultural study of Australia and Hong Kong. Defines fairness and its relationship with legitimacy. Describes a tax survey questionnaire administered to business students, which is broken down by demographic data and includes extensive correlations between tax-fairness perception and tax-compliance behaviour. Concludes that legitimacy is a crucial normative influence in shaping how fair tax systems are perceived to be and how likely people are to comply with their tax obligations.

Notes: Analyses the factors in Taiwanese credit card fraud, and gives case studies in order to classify the main types of fraud; these include fraudulent use of other people's cards, credit card applications with forged documents, use of credit cards for illicit financing, looking for authorisation loopholes to conduct scams, and frauds committed by the staff at financial institutions. Outlines the government's solutions to the problem, including anti-counterfeit designs, legal tasks, fraud prevention mechanisms, establishing risk systems, management of merchants, and educational promotional activities. Concludes with recommendations for further action by government agencies, credit card companies, privileged stores, and cardholders.

Notes: Examines an often overlooked aspect of regulatory compliance in the transactional context, ie UK privacy laws. Looks at how they operate and reviews data privacy laws in the European Union: organisations, as "data controllers", have obligations to individuals as "data subjects", to disclose to them how data about them is being used. Discusses issues in compliance: notice and data disclosures, the legitimate grounds for data processing, data security, international data transfers, and registration of data processing activities. Concludes that data privacy, which was once thought a peripheral matter, now demands greater attention for all involved in prevention, detection and prosecution of financial crimes, as the performance of due diligence, construction of "data rooms" and other typical transactional tasks can all raise privacy issues.

Notes: Compares the approach to disclosure-based regulation of securities markets in Bangladesh with that of India and Malaysia. Describes the present administration of the disclosure regime in Bangladesh, which is split between the Registrar of Joint Stock Companies (RJSC) and the Securities and Exchange Commission (SEC); this mirrors the two sets of laws involved, company law and securities law respectively. Outlines the basic regulatory functions of securities law enforcement: the ability of investors to seek remedies against the infringements of disclosure requirements and the efficiency of the SEC in dispensing justice, and finds that both are weak in Bangladesh. Suggests that more effective regulation in Bangladesh is necessary and that the SEC should be free from government and other interference. Argues that preventive measures should for this reason be the preferred policy; these include investor education and regulatory verification before prospectus issue.