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Barbara LUPPI

Ricercatore Universitario presso: Dipartimento di Economia "Marco Biagi"


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Pubblicazioni

2019 - Argumentation Quantity and Quality: A Litigation Success Function [Articolo su rivista]
Luppi, Barbara; Osorio, Antonio
abstract

Arguments are statements used to persuade someone or in support of a claim. However, these are not perfect and the opponents can exploit them to build their own arguments. In this paper, we propose a new litigation success function that (i) considers the intrinsic and immutable strength of the arguments presented by the plainti and defendant, (ii) solves the limitations of the existing literature in dealing with the English fee-shifting system, and (iii) is exible and tractable in analytical terms. As a robustness check, the proposed litigation success function conrms several important results in the literature, but also brings new insights on how argumentation strength aects the individuals' eorts and the decision to le and contest lawsuits in dierent fee-shifting systems. In this context, we also show how to introduce the worldwide-accepted presumption of innocence in favor of the defendant and the possibility of settlement.


2019 - Productive and Unproductive Competition: a Unified Framework [Articolo su rivista]
Guerra, Alice; Luppi, Barbara; Parisi, Francesco
abstract

Conventional theories of competition classify contests as being either “productive”, when the competitive efforts generate a surplus for society, or “unproductive”, when competition generates no social surplus and merely distributes already existing resources. These two discrete categories of competition create a division of real-world situations into analytical categories that fails to recognize the entire spectrum of competitive activities. Taking the existing models of productive and unproductive competition as benchmark idealizations, this paper revisits the relationship between the privately and socially optimal levels of competition in the full range of intermediate cases, as well as in the extremum cases of destructive and super-productive competition.


2019 - Standards of Proof and Civil Litigation: a Game-Theoretic Analysis [Articolo su rivista]
Luppi, Barbara; Guerra, Alice; Parisi, Francesco
abstract

In litigation models, the parties’ probability to succeed in a lawsuit hinge upon the merits of the parties’ claims and their litigation efforts. In this paper we extend this framework to consider an important procedural aspect of the legal system: the standard of proof. We recast the conventional litigation model to consider how alternative standards of proof affect litigation choices. We analyze the interrelation between different standards of proof, the effectiveness of the parties’ efforts, and the merits of the case. We study how these factors jointly affect the parties’ litigation expenditures, the selection of cases brought to the courts, pretrial bargain solutions and preemptive strategies. Our results show that standards of proof are not only instrumental to balancing the competing goals of access to justice and judicial truth-finding, but they also play a critical role in affecting parties’ litigation investments and settlement choices, and in sorting the mix of cases that will actually be filed and defended in courts. The understanding of the sorting effect of standards of proof sheds light on their role as a policy instrument in civil litigation.


2018 - Behavioral models in tort law [Capitolo/Saggio]
Luppi, Barbara; Parisi, Francesco; Pi, Daniel
abstract

In this chapter, we illustrate how different behavioral problems can be incorporated into the standard economic model of tort law. Through this exercise, we develop a modeling language that can be utilized by law and economic scholars when considering the effect of behavioral biases and cognitive imperfections in tort law. We use these models in conjunction with the standard taxonomy of psychological biases, to show the effect of different biases on the behavior of tort agents. The models we present are applicable to a wide range of tort problems, and have the potential for application to a broader range of legal problems.


2017 - Enforcing bilateral promises: A comparative law and economics perspective [Capitolo/Saggio]
Parisi, F.; Cenini, M.; Luppi, B.
abstract


2017 - Gordon Tullock and the Virginia School of Law and Economics [Articolo su rivista]
Luppi, Barbara; Parisi, Francesco; Guerra, Alice
abstract

In 1999 Gordon Tullock became Professor at the George Mason University Law School. Tullock’s arrival at George Mason brought the economics department and the law school close together. The work that resulted during those years consolidated the methodological foundations for a different way of thinking about the economic analysis of law—the ‘‘functional’’ approach to law and economics. The functional law and economics approach espoused by the Virginia School was not attacking any of the results of the Chicago School or the Yale School, but rather proposing a methodological shift. This paper presents some of the results developed by this school and illustrates Tullock’s controversial positions on trials and on the common law system, through anecdotes, Tullock’s own work and related scholarly contributions.


2016 - Double-Edged Torts: Incentives and Precautions Behind a Veil of Role-Uncertainty [Articolo su rivista]
Luppi, Barbara; Francesco, Parisi; Daniel, Pi
abstract

Many tort cases are characterized by two interrelated elements: “role uncertainty”, which occurs when individuals take precautions ignorant of their roles in future accidents and availability of “dual-effect precautions”, which reduce both the probability of an individual becoming an injurer and the probability that the same individual will become a victim of someone else’s negligence. In this paper, we extend the traditional model to account for role-uncertainty and dual-effect precautions. We find that in these situations, the traditional formulation of Negligence fails to incentivize efficient precautions, inducing excessive role-specific precautions and insufficient dual-effect precautions. For such cases, we argue for a modification of the standard of due care that accounts for the full benefit of dual-effect precautions, in order to incentivize efficient precautionary efforts.


2016 - Optimal Liability for Optimistic Tortfeasors [Articolo su rivista]
Luppi, Barbara; Parisi, Francesco
abstract

As Alicke and Govorun (The self in social judgment, Psychology Press, New York, 2005, p. 85) observed, ‘‘most people are average, but few people believe it.’’ Optimism and other forms of inflated perception of the self lead parties to exercise suboptimal precautions when undertaking risky activities and often undermine the incentive effects of tort rules. In this paper, we show that the presence of optimism undermines several critical assumptions, upon which law and economics scholars have relied when modeling the incentive effects of tort law. We construct a model representing the incentives of ‘‘optimistic’’ tortfeasors and victims, and consider mechanisms for mitigating the effects of biased decision-making. We show that in the presence of optimism, comparative negligence rules are preferable to contributory negligence rules (i.e., the traditional equivalence between contributory and comparative negligence does not hold). Further, we discover the surprising conclusion that the most effective way to correct optimism may often simply be to ‘‘forgive’’ it, shielding optimistic individuals from liability, rather than holding them liable for the harms they cause.


2015 - Litigation as rent seeking [Capitolo/Saggio]
Luppi, Barbara; Parisi, Francesco
abstract

Litigation aims at resolving conflicts. In this chapter we survey the law and economics literature on litigation to illustrate the scope of application of rent-seeking models and their analytical power in the study of law and procedural issues of litigation, including applications in adversarial and inquisitorial procedures, fee-shifting, consolidation and bifurcation of trials and tort liability. We present a unified model of rent seeking recasting the various perspectives in the literature, to illustrate the power of rent-seeking models in addressing different dimensions of substantive and procedural legal problems.


2014 - Biasing, Debiasing and the Law [Capitolo/Saggio]
Luppi, Barbara; Parisi, Francesco; Pi, Daniel
abstract

In this essay, we build on the existing literature on the use of legal strategies for addressing problems of biased judgment and behavior, exploring how heuristics and biases may be exploited to foster efficiency in the presence of other incentive alignment problems. We also introduce two new categories: the hitherto unnoticed counterparts to debiasing and insulating strategies, which we will call “benevolent biasing,” and “cognitive leveraging” strategies.


2013 - Enforcing Bilateral Promises: Comparative Law and Economics [Articolo su rivista]
MARTA SILVIA, Cenini; Luppi, Barbara; Francesco, Parisi
abstract

Parties often exchange promises of future performance with one another. Legal systems frame and regulate contracts involving the exchange of bilateral promises of future performance differently from one another. Two conceptual and practical questions often arise in these bilateral situations. Should a breaching promisor be allowed to force the performance of his non-breaching promisee? Should a breaching party be able to collect damages in a contract if his counterpart was also in breach? This paper examines these interrelated questions from a comparative law and economics perspective. We consider contracts in which parties make reciprocal promises of performance and study the incentives created by applying a defense of non-performance in unilateral breach cases and the “plaintiff in default” preclusion rules in bilateral breach cases.


2013 - Jury Deliberation and the Hung Jury Paradox [Articolo su rivista]
Luppi, Barbara; Francesco, Parisi
abstract

In Williams v. Florida 399 U.S. 78 (1970), the U.S. Supreme Court decided a case concerning the minimum number of jurors required at trial under the Sixth and Fourteenth Amendments. The Court ruled that the a jury comprised of fewer than twelve jurors was constitutionally acceptable. In an effort to speed deliberation and reduce the rate of mistrials, eleven states have subsequently adopted juries of fewer-than-twelve in felony trials, and forty states have diminished their jury sizes for misdemeanor trials. Curiously however, contrary to the predictions of probability theory and "common sense", these reductions in jury sizes have failed to deliver the expected reduction in mistrial rates. In this paper we offer two interrelated explanations for this fact. We formulate a jury model, from which we derive several formal propositions relating to jury deliberation in the presence of informational cascades and heterogeneous jurors. These results inform not only our understanding of jury deliberation, but also democratic theory more broadly.


2012 - Comparative Law and Economics: Accounting for Social Norms [Capitolo/Saggio]
Luppi, Barbara; Francesco, Parisi
abstract

Recent comparative law and economics literature utilizes quantitative methods to evaluate the effectiveness of alternative laws and legal institutions. The effectiveness of the law critically hinges upon compliance. Legal policymakers announce the consequences of a violation of law by threatening sanctions or promising rewards. The extent to which sanctions or rewards are actually imposed depends on the level of legal enforcement. Legal policymakers create incentives for compliance by selecting the severity of legal sanctions or the magnitude of rewards and by setting levels of legal enforcement. Deterrence theory assumes that higher expected punishments (the combination of severity and probability of punishment) produce higher detererrence. Enforcement is generally imperfect since not all behavior is observed; hence sanctions and rewards are administered with uncertainty. The expected legal sanction (reward) affects individual private incentives through a change in expected costs (benefits) of legal compliance. Deterrence theory assumes that individuals make a calculated and rational decision, weighing the pros and cons of specific activities under the law. Note however that many acts are committed under exceptional circumstances and a rational calculation of costs and benefits may be overshadowed by other contingent factors.Whether through threats or promises, the effects of the law depend on the actual level of enforcement. Legal theorists believed that a law without enforcement was equivalent to a law without a sanction (lex imperfecta) and was doomed to be ineffective. However, recent legal and economic literature has shown that the effects of a law are not limited to the creation of incentives through the enforcement of legal sanctions. Law conveys social values to society. According to expressive law theories and focal-point theories of law (Cooter, 1998 and 2000; McAdams, 2000a, 2000b), law plays an expressive role in society. To the extent that the values expressed by the law are internalized, private enforcement and compliance becomes possible even in the absence of central legal enforcement. Self-compliance stems from the internalization of the rule and the resulting first-party enforcement.Individual values and social norms of conduct influence human behavior. Personal values represent an individual's expressed value judgments identifying what someone should and should not be allowed to do. Individuals willfully behave according to their personal values and impose sanctions on violators of private norms. Personal values and norms provide private incentives to individuals, affecting the payoff associated with a given behavior. Alternatively, social norms identify frequency distributions of individual values and norms in the population, indicating private values and norms more frequently adopted by individuals in the population. Hence, the exogenous restrictions imposed by legal rules may not be the only driving force behind individual behavior; an individual's choices are also substantially influenced by private and social norms.The present contribution examines the determinants of self-compliance with rules in the absence of legal enforcement. Self-compliance with the law refers to the effects of first-party enforcement, where individuals withhold action because of their preference for law-abiding behavior, even if the rule lacks external enforcement. Current legal and economic theory adopts the term “first-party enforcement” to refer to situations where the subject of the law faces a conditional cost in case of violation of the law under the form of guilt or shame. These conditional costs stem from an honor system of "upright conduct," in which compliance with the rules stands as an ethical imperative.


2012 - Litigation and Legal Evolution: Does Procedure Matter? [Articolo su rivista]
Luppi, Barbara; Francesco, Parisi
abstract

Gordon Tullock's critique of the Common law runs against much of the conventional wisdom in the law and economics literature. In this paper we revisit one of the most controversial aspects of Tullock's critique. By applying Tullock's own model of rent-seeking to litigation, we study the effect of alternative procedural rules on civil litigation. Our results provide support for Tullock's controversial critique of the Common law, revealing an evolutionary bias in the production of legal rules by courts. We extend the standard litigation model to study the effects of alternative procedural systems on the evolution of the Common law.


2012 - Politics With(Out) Coase [Articolo su rivista]
Luppi, Barbara; Francesco, Parisi
abstract

Political markets may be curative of political externalities, yet they are often unviable due to the presence of bargaining externalities. In this paper we study the extent to which the choice of voting dimensions may affect the viability of Coasian bargaining in a political context. The results suggest that bargaining in a multi-dimensional policy space, although desirable in an ideal world of zero-transaction costs, is almost unavoidably affected by bargaining externalities. Disaggregating the policy choices and voting in a one-dimensional policy space can reduce bargaining externalities and lead to median-voter outcomes. Bargaining by a limited number of players in a median-voter situation can achieve a social first-best. We show the equivalence between the outcomes of multiple independent voting in one-dimensional space and the hypothetical outcome of Coasian bargaining in a multi-dimensional policy space.


2012 - Quantitative Methods in Comparative Law [Capitolo/Saggio]
Luppi, Barbara; Francesco, Parisi
abstract

Various important debates have accompanied the growth and evolution of comparative law. These debates have been an important force behind the transformation of the methodology of comparative law during the last several decades. Comparative law has evolved away from a merely descriptive methodology that characterized the main contributions to this field prior to the 1950s. The subsequent methodological variants to comparative law followed a variety of analytical approaches, unveiling common elements behind apparently different legal rules as well as revealing substantive differences that existed across legal systems behind the apparent uniformity of black letter law. Here, the focus on comparative legal history and the identification of legal formants typical of the best scholars in comparative law of the second half of the twentieth century has generated important contributions, identifying synecdoches and articulating cryptotypes.Unlike prior methodological transformations within the field of comparative law, the influence of the 'comparative law and economics method' has been at the same time broad and controversial. Comparative law and economics is increasingly fashionable among academics. It is probably the most successful example of the recent expansion of law and economics into areas that were once considered beyond the realm of economic analysis. Its popularity notwithstanding, comparative law and economics also attracts several criticisms and generates academic skepticism. The critiques are often on point and highlight the many misuses of economic analysis in comparative law (and law in general) and the resulting misunderstandings and inadequacies of the claims generated by scholars that utilize this method of analysis. Since we are both practitioners of law and economics and one of us teaches comparative law, in this article we wish to shed some light on the multi-faceted structure of the comparative law and economics method, endorsing some the recent critiques moved to comparative law and economics while defending the merits of the methodology in its proper domain of application.


2012 - Subsidiarity for a Changing Union [Capitolo/Saggio]
Luppi, Barbara; Emanuela, Carbonara; Francesco, Parisi
abstract

Federal governments and unions of states face the fundamental task of allocating the creation and enforcement of policy to either federal (central) government or local governments. Within the European Union, subsidiarity is intended to prescribe the allocation of competences at the central (European Union) or local (member states) level and to ‘balance’ the European Union's powers at the central level with the member states' powers at the local level.Prior to recognition of the subsidiarity principle, the distribution of powers between the Community and the member states represented one of the most delicate and contentious political issues in the European Union. Since the creation of the European Economic Community in 1958, member states’ political actors were critical of what they perceived to be an irreversible process of centralization of competences at the Community level. Although in theory, the transfer of competences from member states to the Community could only take place through conferral within the limits of the competences conferred by the member states to attain the Community objectives set out in Articles 2 and 3 of the 1958 Treaty of Rome (i.e., the creation of a common market and the harmonization of related policies), competences were often reallocated outside the original scope as a result of political considerations. Everling (1997) and Carbonara, Luppi and Parisi (2009) provide a number of examples of reallocation of competences that were hardly warranted by the original treaty provisions, ranging from aids or levies to regulation of product quality and special monetary systems. Political pressures towards centralization found little constraints from within the Community laws and procedures. The 1986 Single European Act expanded the scope of the Community action to new fields (such as research, finance, economic convergence, social policy and environment) and raised the member states’ concern towards new waves of centralization. Several intergovernmental conferences addressed these concerns and eventually laid the foundations for the Maastricht Treaty, redefining the boundaries of the enlarged political, economic and monetary union. The member states’ concerns were addressed in these intergovernmental conferences with a discussion of possible rules that could provide a more effective constraint to new centralization proposals. Among these rules, subsidiarity played an important role as a potential constraint against unwarranted centralization. The subsidiarity principle was formally adopted in 1992 by the Treaty of the European Union (Treaty of Maastricht, signed on 7 February 1992, entered into force on 1 November 1993). The December 1992 Edinburgh summit further stressed the critical role of subsidiarity, requiring all institutions of the Union to use a test of subsidiarity as a condition precedent to their policy action, giving the European Court of Justice the role of guidance and adjudication to ensure compliance with subsidiarity. The subsidiarity principle is currently included in Article 5 of the consolidated version of the Treaty Establishing the European Community, which states that “The Community shall act within the limits of the powers conferred upon it by this Treaty and of the objectives assigned to it therein. In areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the member states and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community. Any action by the Community shall not go beyond what is necessary to achieve the objectives of this Treaty.” The subsidiarity principle also plays a prominent role in the draft of the proposed European Constitution, under Article 9 which states that the principles of sub


2012 - The Rise and Fall of Polluter-Pays Principle in Developing Countries [Articolo su rivista]
Luppi, Barbara; Francesco, Parisi; Shruti, Rajagopalan
abstract

The polluter-pays principle stipulates that the person who damages the environment must bear the cost of such damage. A number of developing countries have recently extended this principle to create an obligation on the state to compensate the victims of environmental harm. This variation of the polluter-pays principle is aimed at ensuring victims’ compensation when polluters cannot be identified or are insolvent and at providing stronger incentives for local governments’ monitoring of environmentally risky activities. These regimes hold local governments primarily or jointly-and-severally liable for environmental damage and allow them to act in subrogation against the polluters. In this paper we study the effect of these forms of governmental liability on the polluters’ incentives and on aggregate levels of environmental harm. We develop an economic model to study the conditions under which governmental liability may be preferable to direct polluters’ liability as an instrument of environmental protection. We conclude by suggesting that these variations of the polluter-pays regime may be desirable in environments characterized by widespread poverty, high interest rates, judicial delays and uncertainty in adjudication.


2011 - Incentive Effects of Class Actions and Punitive Damages Under Alternative Procedural Regimes [Articolo su rivista]
Luppi, Barbara; F., Parisi; M., Cenini
abstract

In an economic perspective, punitive damages and class actions can be viewed as sharing a common economic function – creating optimal deterrence. Building on Parisi and Cenini (2010), we study the effect of alternative procedural regimes on the effectiveness of punitive damages and class actions. Specifically, we compare the workings of punitive damages and class actions in the American and English (“loser-pays”) regimes. Our findings help explain the limited use and late adoption of class actions and punitive damages in Europe.


2011 - Optimal Remedies for Bilateral Contracts [Articolo su rivista]
Luppi, Barbara; F., Parisi; V., Fon
abstract

In several contract situations, parties exchange promises of future performance, creating reciprocal obligations. In this paper, we extend the standard models of contract remedies to consider the incentives created by contracts where both parties provide only executory consideration and where the parties’ obligations are yet to be performed. We show that the legal remedies that govern these contracts provide valuable enforcement mechanisms that are not available when parties enter into a contract where they exchange a promise for an actual performance. We show that when the values of the parties’ performances are interdependent, contracts with executory consideration create effort incentives that are superior to the incentives of contracts with executed consideration. In contracts with independent values, contracts with executory consideration also offer a valuable instrument to correct enforcement imperfections. Such imperfections include imperfect compensation and litigation costs.


2011 - Rules versus Standards [Capitolo/Saggio]
Luppi, Barbara; Francesco, Parisi
abstract

Just like contracts, laws are of necessity incomplete. Lawmakers cannot effectively foresee all the particular circumstances to which their laws could apply. Incompleteness of law is not only a matter of unavoidable necessity. At times, incomplete laws can be purposefully enacted as a way to delay the decision-making process, transferring to the judiciary some of the tasks otherwise carried out ex ante by the legislature. Lawmakers can choose the level of incompleteness of the laws that they write by formulating laws with different degrees of specificity. The law and economics literature refers to the choice of specificity of legal rules as a choice between "rules" (laws with high levels of specificity) and "standards" (laws with low levels of specificity). The present study concerns the functionality of these rules or standards, the consequences of their incorporation into laws, and their significance from an economic perspective.


2011 - Toward an Asymmetric Coase Theorem [Articolo su rivista]
Luppi, Barbara; F., Parisi
abstract

Various reformulations of the Coase theorem have developed normative corollaries on the choice of optimal remedies in the presence of positive transaction costs. In this article, we consider the extent to which these propositions are affected by the presence of asymmetric transaction costs, and we offer a reformulation of the Coase theorem which takes into account asymmetrical transaction costs. Our analysis combines several insights from the existing literature on property-type vesus liability-type remedies, identifying the conditions for the superiority of each type of remedy. Further, we consider the possible use of mixed remedies and identify the optimal scope of such solution.


2010 - Il Nuovo Accordo sul Capitale e il Rapporto Banca – Impresa nel Sistema BCC Emilia-Romagna [Articolo su rivista]
Luppi, Barbara; Massimiliano, Marzo; ANTONELLO EUGENIO, Scorcu
abstract

Il lavoro analizza il grado di conoscenza di Basilea II e i connessi effetti sul comportamento delle imprese attraverso un’indagine realizzata su un campione di imprese clienti delle Banche di Credito Cooperativo in Emilia-Romagna nel 2007. Le imprese a conoscenza degli effetti di Basilea II sono i tre quarti del campione, rispetto al 47,5% rilevato nel 2005 (Bentivogli et al., 2007). A fronte delle modifiche introdotte da Basilea II, le imprese non si limitano ad accrescere livello e qualità delle informazioni societarie, ma reagiscono adeguando in diverse direzioni la struttura dell’impresa, anche aumentando il rapporto tra patrimonio e debito. Nel campione la percezione degli effetti di Basilea II è influenzata dall’intensità del rapporto banca-impresa, approssimata dall’essere soci BCC, e dalla presenza di mono/multi affidamento. Si registra un maggior grado di conoscenza di Basilea II e l’adozione più frequente di azioni strutturali tra i soci. Infine, gli effetti di Basilea II nelle procedure di erogazione del credito sono spesso considerati limitati dalle imprese anche se, a fronte di una tendenziale neutralità nei flussi di credito, un numero crescente di imprese avverte un aumento di tassi e costi.


2010 - Judicial Creativity and Judicial Errors: An Organizational Perspective [Articolo su rivista]
Luppi, Barbara; F., Parisi
abstract

The different role played by case law and the historical and conceptual differences between the doctrines of precedent in common law and civil law traditions are important determinants of judicial creativity. In this article we consider a hybrid version of stare decisis, called with the French name of jurisprudence constante, adopted by mixed jurisdictions. Unlike stare decisis which allows a single precedent to establish case law, the doctrine of jurisprudence constante links the recognition of a judge-made rule to the existence of a consecutive line of decisions affirming the same legal principle. We develop a model to consider the effects of this doctrine on the social costs arising from judicial error and uncertainty in case law. We further consider the effects of these alternative doctrines of precedent on judicial creativity and ideological bias in judge-made law.


2010 - Law and Economics: the Comparative Law and Economics of Frustration in Contracts [Capitolo/Saggio]
Luppi, Barbara; Marta, Cenini; Francesco, Parisi
abstract

Frustration of purpose is a defense to the enforcement of a contractual obligation. Legal systems generally provide this defense when an unforeseen event undermines a party’s purpose for entering into a contract. In many legal systems frustration of purpose is often treated and discussed jointly with the related doctrine of impossibility, which concerns situations where unforeseen events render impossible (practical impossibility) or far more burdensome (economical impossibility) the performance of the obligations specified in the contract. Although different in their substance, the economic analysis of the doctrines of frustration and impossibility share a common logic. In the following analysis we shall therefore treat these doctrines together. When unexpected contingencies occur during the performance of a contract, there may be a divergence between what parties have expressly agreed upon in the contract and what they have implicitly assumed was their contractual obligation in terms of assumption of risk. In other words, when there is a period of time between the conclusion of the contract and the performance of the parties, there may be a fundamental change of circumstances that makes the performance of the contract far more burdensome, or even physically impossible, for one party, or that completely frustrates the purpose of the contract for one party. The event that causes the change is, as said, unexpected or unforeseen and is not explicitly referred to in the parties’ agreement. If it were in the parties’ agreement, the general rules on breach of contract would apply. In all of these cases, the overarching question is whether the burdened party should be obligated to perform (or, if her performance has become impossible, pay damages) or whether she may be allowed to escape contractual liability by resorting to one of several “contract defenses.” Such defenses might include the rebus sic stantibus (“all the things thus standing” ) clause under which a party’s obligation under the contract is required only when conditions are the same as they were when the contract was formed.


2009 - “Basilea II e il Rischio di Insolvenza: Un’Analisi Empirica [Articolo su rivista]
Luppi, Barbara; Massimiliano, Marzo; ANTONELLO EUGENIO, Scorcu
abstract

Il Nuovo Accordo sul Capitale, noto come Basilea 2, ha indotto una progressiva armonizzazione dei processi di valutazione del merito di credito in Italia. In questo lavoro si analizzano gli effetti di tale accordo in base alla definizione di default che verrà adottata al termine del periodo di transizione. L’analisi si basa su un campione rappresentativo del portafoglio retail di una grande banca italiana e distingue inoltre tra Nord, Centro e Sud Italia. Le indicazioni che emergono evidenziano una maggiore rischiosità rispetto a quella attuale (dovuta all’attitudine delle imprese italiane a ritardare i pagamenti), anche se gli impatti sui requisiti di capitale rimangono limitati. Emerge inoltre l’opportunità di una calibrazione del rischio di credito che tenga conto delle diversità territoriali.


2009 - Behavioral Economics: limitazioni cognitive, preferenze sociali e comportamento economico [Articolo su rivista]
Luppi, Barbara; Luca, Zarri
abstract

As far as recent developments in economic theory are concerned, «Behavioral Economics» consti- tutes one of the most promising frontiers in the last ten years, as the Nobel Prize for Economics recently won by the social psychologist Daniel Kahneman and the prestigious John Bates Clark Medal granted to the young economist Matthew Rabin testify. It is then worth asking the following questions: what is, exactly, Behavioral Economics? What are the reasons behind its recent success? This survey aims at pro- viding a first answer, both directly and indirectly, to such questions, by illustrating the main contribu- tions developed within such ambitious research program. Behavioral Economics aims at increasing the explanatory and predictive power of economic analysis through an increase in the degree of realism of the assumptions at the basis of economic models, i.e. by means of a greater and greater integration between economics and psychology (but also between economics and social sciences such as, for example, cultural anthropology). While standard economics assumes that agents are driven by well-defined and stable pref- erences and act rationally, psychology reveals that it is often the case that such assumptions cannot be taken as an adequate and satisfactory description of human behavior. In this light, Behavioral Econom- ics focuses on markets where some (if not all) economic agents involved make choices which appear to substantially deviate from traditional economic predictions. In this survey we focus on the following two fields of studies within Behavioral Economics: a first field deals with the main cognitive limitations af- fecting economic behavior (Sections 2 and 3), whereas a second one is related to the role of the so called «social preferences» (Section 4). Both areas aim at incorporating the major results obtained both experi- mentally and empirically into formal economic analysis. Within the first area, it is assumed, analogously to neoclassical models, that agents act according to the self-interest hypothesis, but also that «rational» be- havior is affected by several cognitive limitations (in line with classical contributions on bounded rational- ity; see, in particular, Simon 1978; 1979; 1992). By contrast, the second area departs from the neoclassical approach by introducing modifications at motivational level. Unlike traditional analyses, social preferences studies focus, at both theoretical and experimental level, on interaction scenarios where players act not on classic selfish preferences but on different types of social preferences. In other words, it is still assumed that individual behavior is rational, but also that various forms of non-selfish rationality get into the pic- ture. In particular, behavioral choices by individual agents (as well as their objective functions) can be (either positively or negatively) affected by other players’ preferences, intentions, material outcomes and/or behaviors.


2009 - Beyond Debiasing: Overconfidence in Tort Law [Articolo su rivista]
Luppi, Barbara; Francesco, Parisi
abstract

Overconfidence is an overestimation of one’s own ability that is often associated with an underestimation of risks and inflated estimation of one’s future success. Debiasing overconfidence through tort law is not an easy task. If people tend to believe that risks are less likely to materialize for themselves than for others, they inadequately react to legal threats and incentives. For example, overconfidence may lead to the assumption of excessive risks, undermining the deterrent effect of liability rules, even if parties are provided accurate information about statistical facts.


2009 - Optimal Timing of Legal Intervention: The Role of Timing Rules [Articolo su rivista]
Luppi, Barbara; Francesco, Parisi
abstract

In a recent article on the Harvard Law Review, Jacob E. Gersen and Eric A. Posner investigate the optimal timing of legislative action and examine the role of timing rules in constraining legislative action. This article considers a quite relevant topic, which thus far lacked a systematic treatment in the literature. As Gersen and Posner point out, decisions about the timing of legal intervention are often as important as decisions about the content of new law. Yet, the attention given to this issue is disproportionately small in the literature. Gersen and Posner successfully fill this gap in the literature, providing a comprehensive and coherent discussion of the various constitutional, economic, practical and theoretical issues, developing a very interesting normative framework on the optimal timing of legislation. In Section 1, of this comment we identify some of the issues that become relevant when considering the optimal timing of lawmaking. In Section 2, we touch upon some of the points discussed in Gersen and Posner, identifying some missed opportunities and formulate suggestions for future extensions.


2009 - Self-Defeating Subsidiarity [Articolo su rivista]
Luppi, Barbara; Francesco, Parisi; Emanuela, Carbonara
abstract

The subsidiarity principle was formally adopted in 1992 by the European Union to limit excessive centralization of competences. According to the subsidiarity test, a given policy responsibility should be allocated at the lowest possible level of government, unless there is evidence that the central government has a comparative advantage in fulfilling the task under consideration. Contrary to its stated goal, the adoption of the subsidiarity principle was followed by a wave of intense centralization. In this paper, we address this paradox studying the effects and the limitations of the subsidiarity test in promoting an optimal level of centralization.


2008 - Credit risk and Basel II: are nonprofit firms financiallydifferent? [Articolo su rivista]
Luppi, Barbara; Marzo, Massimiliano; ANTONELLO EUGENIO, Scorcu
abstract

We estimate a model of credit risk for portfolios of Small and Medium-sized enterprises, conditional on being a non-profit or for-profit firms. The estimation is based on a unique dataset on Italian firms provided by a large commercial bank. We show that the main variables to identify creditworthiness are different for non-profit and for-profit firms. Traditional balance sheet information seems to be less crucial for non-profit firms.


2008 - Optimal Territorial Scope of Laws: Subsidiarity and Legal Harmonization [Capitolo/Saggio]
Emanuela, Carbonara; Luppi, Barbara; Francesco, Parisi
abstract

In this paper we analyze the factors that should be considered when allocating a given policy function at a particular level of government and how these factors affect the growth and evolution of multi-level governments. After discussing the interplay of economies of scale, economies of scope, and heterogeneity of preferences in determining the optimal level of legal intervention, we show that the subsidiarity principle can have mixed effects as a firewall against progressive centralization. Our economic model of subsidiarity reveals that once some functions become centralized, further centralization becomes easier and often unavoidable. Contrary to its intended function, a piecemeal application of the subsidiarity principle can trigger a path-dependent avalanche of centralization, turning subsidiarity into a self-defeating statement of principle.


2008 - Painful regret and elation at the Track [Articolo su rivista]
Luppi, Barbara; Adi, Schnytzer
abstract

We present an empirical study of loss aversion in the Hong Kong horse betting market. We provide evidence of the presence of loss aversion in a context of complete absence of the favourite-longshot bias. This would suggest that, since loss aversion is a psychological bias, the favourite-longshot bias may not necessarily be caused by psychological issues and may be due, for instance, to informational asymmetry. We investigate different types of bettors and their attitude towards loss aversion. Our data set enables us to distinguish approximately among insiders, unsophisticated outsiders and sophisticated outsiders. The results show clearly that even sophisticated bettors are beset by loss aversion, while even unsophisticated outsiders display no favourite-longshot bias. Thus, our paper provides evidence that loss aversion may be an attitude innate rather than learned, regardless of the level of sophistica- tion in designing economic behaviour or the extent of information asymmetry. Chen et al (2006) show that capuchin monkeys display biases when faced with gambles, including loss aversion, and provide evidence that loss aversion extends beyond humans. The present work supports the idea that loss aversion may be a more universal bias, arising regardless of experience and culture and demonstrates that loss aversion is displayed even by those bettors regarded in the market as “smart money”. Further, we find that more sophisticated and experienced bettors display a higher level of loss aversion. This result is consistent with the findings of Haigh and List (2005), who show that professional traders in financial markets exhibit more loss aversion than do students.


2007 - Basilea 2 e l’accesso delle cooperative al credito [Articolo su rivista]
Luppi, Barbara; Massimiliano, Marzo
abstract

Il presente articolo investiga il ruolo della forma cooperativa nella valutazione della probabilità di default a seguito dell'introduzione degli Accordi di Basilea 2.