Giovanni Immordino

Looking for a Guide to Protect the Environment: The Development of the Precautionary Principle

If the precautionary principle is to become the guide of the international community for environmental protection policies, an economic interpretation of the principle is in order. The analysis of case studies and a survey of the recent decision theoretic literature show the lack of a fully satisfactory economic model. More generally various theoretical and empirical results show that the principle cannot be assumed to apply a priori. Though it has been proposed by international treaties as a rule of thumb for situations of scientific uncertainty, the precautionary principle could actually be inefficient. Copyright Blackwell Publishing Ltd, 2003.

Legal institutions, innovation, and growth

We analyze the relationship between legal institutions, innovation and growth. We compare a rigid (law set ex-ante) legal system and a exible one (law set after observing current technology). The exible system dominates in terms of welfare, amount of innovation and output growth at intermediate stages of technological development - periods when legal change is needed. The rigid system is preferable at early stages of technological development, when (lack of) commitment problems are severe. For mature technologies the two legal systems are equivalent. We nd that rigid legal systems may induce excessive (greater than rst-best) R&D investment and output growth.

Accomplice Witnesses and Organized Crime: Theory and Evidence from Italy

We develop an agency model of organized crime accounting for the main trade-offs involved in the introduction of an accomplice-witness program. We characterize the optimal policy and identify its main determinants in a framework where public officials can be dishonest. Our predictions are tested by using data for Italy before and after the introduction of the 1991 accomplice-witness program. As predicted by the model and the earlier antitrust literature, the program appears to have strengthened deterrence and enhanced prosecution. Moreover, consistent with a novel prediction of our theory, the evidence suggests that the program efficacy is affected by the judicial system efficiency.

Hormone beef, chlorinated chicken and international trade

Abstract We study international trade in innovative goods subject to uncertain consumer health effects. Such goods are often at the center of international trade disputes. We show that an interesting form of protectionism may arise because of scientific uncertainty. A free-riding effect is identified, implying more conservative behavior by countries. We also study the role of producers (lobbies) in providing valuable information, finding that the innovative lobby has an advantage in providing information as compared with the lobby producing the ‘traditional’ good. Moreover, lobbies disclose more information when the health effects are long lasting.

Fairness, Consumer Consciousness and the Welfare of Less Developed Countries

Activist organizations, interest groups, unions and media reveal information about labour standards. In a world where some consumers are not self-interested, the price of a product made by a multinational enterprise and the latters location and production decisions depend on the difference in labour standards between developed and less developed countries. We study the effect of an increase in the fraction of informed inequity-averse consumers on the behaviour of multinational frms, on the equilibrium level of labour standards and on the welfare of workers in the less developed countries. An increase in activism deteriorates labour practices and decreases welfare.

Parents, Television and Cultural Change

This paper develops a model of cultural transmission where television plays a central role for socialization. Parents split their free time between educating their children which is costly and watching TV which though entertaining might socialize the children to the wrong trait. The free to air television industry maximizes advertisement revenue. We show that TV watching is increasing in cultural coverage, cost of education, TVs entertainment value and decreasing in the perceived cultural distance between the two traits. A monopolistic television industry captures all TV watching by both groups if the perceived cultural distance between groups is small relative to the TVs entertainment value. Otherwise, more coverage will be given to the most profitable group where profitability increases in group size, advertisement sensitivity and perceived cultural distance. This leads to two possible steady states where one group is larger but both groups survive in the long run. Competition in the media industry might lead to cultural extinction but only if one group is very insensitive to advertisement and not radical enough not to watch TV. We briefly discuss the existing evidence for the empirical predictions of the model.

Antitrust, Legal Standards and Investment

We study the interaction of a firm that invests in research and, if successful, undertakes a practice to exploit the innovation, and an enforcer that sets legal standards, fines and accuracy. In this setting deterrence on actions interacts with deterrence on research. When the practice increases expected welfare the enforcer commits not to intervene by choosing a more rigid per-se legality rule to boost investment, moving to a more flexible discriminating rule combined with type-I accuracy for higher probabilities of social harm. Patent and antitrust policies act as substitutes in our setting; additional room for per-se (illegality) rules emerges when fines are bounded. Our results on optimal legal standards extend from the case of (uncertain) investment in research to the case of (deterministic) investment in physical assets.

Reciprocity in the Principal–Multiple Agent Model

Abstract This paper studies how incentives are affected by intention-based reciprocity preferences when the principal hires many agents. Our results describe the set of agents’ sensitivities to reciprocity required to sustain a given strategy profile. We also show that hiring reciprocal agents to implement a first- or a second-best contract will always benefit the principal if the strategy profile is symmetric. Instead, when the profile (first or second best) is asymmetric the principal’s interest might be better served by self-interested agents. We conclude the paper by clarifying when symmetric profiles are most likely to arise.

Organised Crime, Insider Information and Optimal Leniency

When ‘low-rank’ criminals are offered to cooperate with justice in exchange of judicial leniency, their information generates ex post rents that may actually favour their bosses and increase the crime profitability. Hence, an optimal leniency policy must trade off the positive impact of helpful disclosure of insider information and the positive externality that these rents exert on the organisations returns from crime. Due to this tension, the amnesty that minimises the probability of crime induces the Legislator to restrict the access to the programme, by excluding informants owning potentially useful knowledge. This result survives to a number of robustness checks.

Advertising and Cost Reduction

Consider a Cournot oligopoly where producers launch new products. At first potential buyers are unaware of the product, and firms decide on levels of production, advertising expenditure and a cost-reducing investment. We find the conditions for complementarities among scale, advertising and innovation strategies to arise. In a duopoly with substitute products all variables are higher for the firm that moves from mass advertising to targeted advertising but decrease for the other. In an oligopoly with complementary products all variables are higher for all firms when they shift away from mass marketing. We conclude by linking our results to the empirical literature on internalization which finds a positive relationship between advertising intensity and foreign direct investment.