Eric Bennett Rasmusen

Creating and Enforcing Norms, with Special Reference to Sanctions

Two central puzzles about social norms are how they are enforced and how they are created or modified. The sanctions for violation of a norm can be categorized as automatic, guilt, shame, informational, bilateral- costly, and multilateral-costly. Problems in creating and enforcing norms are related to which sanctions are employed. We use our analysis of enforcement and creation of norms to analyze the scope of feasible government action either to promote desirable norms or to repress undesirable ones.

Stigma and Self-Fulfilling Expectations of Criminality

A convicted criminal suffers not only from public penalties but from stigma, the reluctance of others to interact with him economically and socially. Conviction can convey useful information about the convicted, which makes stigmatization an important and legitimate function of the criminal justice system quite apart from moral considerations. The magnitude of stigma depends on expectations and the crime rate, however, which can lead to multiple, Pareto-ranked equilibria with different amounts of crime.

Strategic Implications of Uncertainty Over One's Own Private Value in Auctions

Bidders have to decide whether and when to incur the cost of estimating their own values in auctions. This can explain sniping - flurries of bids late in auctions with deadlines - as the result of bidders trying to avoid stimulating other bidders into examining their bid ceiling more carefully.

Cheap Bribes and the Corruption Ban: A Coordination Game among Rational Legislators

Legislators in modern democracies (a) accept bribes that are small compared to the value of the statutes they pass and (b) allow bans against bribery to be enforced. In our model of bribery, rational legislators accept bribes smaller not only than the benefit the briber receives but than the costs the legislators incur in accepting the bribes. Rather than risk this outcome, the legislators may be willing to suppress bribery altogether. The size of legislatures, the quality of voter information, the nature of party organization, and the structure of committees will all influence the frequency and size of bribes.

Why are Japanese Judges so Conservative in Politically Charged Cases

Theory suggests that Japanese politicians have weaker incentives than U.S. politicians to keep lower court judges independent. Accordingly, we hypothesize that Japanese lower court judges who defer on sensitive political questions will do better in their careers. To test this, we assemble several new data sets and measure the quality of the assignments received by about 400 judges after deciding various types of cases. We find that judges who deferred to the ruling party in politically salient disputes obtained better posts than those who did not, and that judges who actively enjoined the national government obtained worse posts than those who did not. We also hypothesize that judges with forthrightly leftist preferences do worse in their careers. We measure the speed at which the 500 judges hired during the 1960s moved up the pay scale and find indications that judges who joined a leftist group were promoted more slowly than their peers.

Lobbying when the decisionmaker can acquire independent information

Politicians trade off the cost of acquiring and processing information against the benefit of being re-elected. Lobbyists may possess private information upon which politicians would like to rely without the effort of verification. If the politician does not try to verify, however, the lobbyist has no incentive to be truthful. This is modelled as a game in which the lobbyist lobbies to show his conviction that the electorate is on his side. In equilibrium, sometimes the politician investigates, and sometimes the information is false. The lobbyists and the electorate benefit from the possibility of lobbying when the politician would otherwise vote in ignorance, but not when he would otherwise acquire his own information. The politician benefits in either case. Lobbying is most socially useful when the politicians investigation costs are high, when he is more certain of the electorates views, and when the issue is less important.

Entry for Buyout

The possibility of buying out an entrant has an import ant effect on entry deterrence. Entrants can blackmail the incumbent by threatening to keep prices low, and buyout can make entry profitab le which otherwise would not be. In particular, the entry-deterrence policy of excess capacity to reduce the postentry price can not only fail, but work against the incumbent. The presence of multiple oligop olistic incumbents or multiple potential entrants, however, can disco urage entry for buyout. Copyright 1988 by Blackwell Publishing Ltd.

Norms in Law and Economics

Everyone realizes the importance of social norms as guides to behavior and substitutes or complements for law. Coming up with a paradigm for analyzing norms, however, has been surprisingly difficult, as has systematic empirical study. In this chapter of the Handbook of Law and Economics, edited by A. Mitchell Polinsky and Steven Shavell and forthcoming in 2005, we survey the topic.

Explaining Incomplete Contracts as the Result of Contract-Reading Costs

Abstract Much real-world contracting involves finding new clauses to add to a basic agreement, clauses which may or may not increase the welfare of both parties. The parties must decide which complications to propose, how closely to examine the other sides proposals, and whether to accept them. This suggests a reason why contracts are incomplete in the sense of lacking Pareto-improving clauses: contract-reading costs matter as much as contract-writing costs. Fine print that is cheap to write can be expensive to read carefully enough to understand the value to the reader, and especially to verify the absence of clauses artfully written to benefit the writer at the readers expense. As a result, complicated clauses may be rejected outright even if they really do benefit both parties, and this will deter proposing such clauses in the first place.

How optimal penalties change with the amount of harm

Intuition tells us that the optimal penalty and court care to avoid error should rise smoothly with the harm to the victim. This is not always correct; sometimes the optimal penalty and level of court care increase discontinuously with harm, even when penalties deter harm and court care reduces error continuously. This is shown in a model in which the social cost of crime consists of its direct harm, the cost of court care, and the cost of false convictions.