Rebecca Stone

Pricing Misperceptions: Explaining Pricing Structure in the Cell Phone Service Market

The common pricing structure in the cellular service market is a three-part tariff comprising: (1) a monthly charge; (2) a number of allotted minutes – talking minutes that the monthly charge pays for; and (3) an overage charge – a per-minute price for minutes beyond the plan limit. We argue that the three-part tariff is a rational response by sophisticated carriers to consumer misperception about their cell-phone usage. In particular, the three-part tariff is advantageous to carriers, because it exacerbates the effects of consumer misperception, leading consumers to underestimate the cost of cellular service. We develop a simple model that formalizes this account. We then proceed to test our theory using a unique dataset of subscriber-level, monthly billing and usage information for 3,730 subscribers at a single wireless provider. Policy implications are discussed.

Desert and inequity aversion in teams

Teams are becoming increasingly important in work settings. We develop a framework to study the strategic implications of a meritocratic notion of desert under which team members care about receiving what they feel they deserve. Team members find it painful to receive less than their perceived entitlement, while receiving more may induce pleasure or pain depending on whether their preferences exhibit desert elation or desert guilt. Our notion of desert generalizes distributional concern models to situations in which effort choices affect the distribution perceived to be fair; in particular, desert nests inequity aversion over money net of effort costs as a special case. When identical teammates share team output equally, desert guilt generates a continuum of symmetric equilibria. Equilibrium effort can lie above or below the level in the absence of desert, so desert guilt generates behavior consistent with both positive and negative reciprocity and may underpin social norms of cooperation.

Following Precedent to Signal Ideological Neutrality

I analyze a game-theoretic model of judicial decisionmaking in which judges are concerned both about promoting substantive policy outcomes and developing a reputation for being ideologically neutral. I argue that judges may be motivated to develop such a reputation either because they are concerned about promoting the institutional legitimacy of their court or because being perceived as too ideological may hamper a judges promotion prospects. I characterize conditions under which such reputational concerns lead judges to follow precedent in order to signal their ideological neutrality.

Law’s motivational landscape

The central contention of Professor Schauer’s illuminating book, The Force of Law, is that understanding the ways in which legal systems coerce conformity to their edicts is central to understanding the nature of law and legal systems. As HLA Hart demonstrated in The Concept of Law, a legal system could exist, at least in theory, without forcing anyone to conform to its rules, if officials and citizens adopt an internal point of view towards legal rules – that is, if they treat legal rules as reasons in themselves. So, following Hart, the jurisprudential literature has emphasized that coercion is not an essential property of a legal system. But, Schauer observes, coercion is nonetheless plainly a prominent feature of legal systems as we know them. Moreover, he contends, there is little convincing support for the proposition that many people adopt an internal point of view towards legal rules. In particular, he argues that many empirical studies that purport to support this proposition have failed to distinguish uncoerced conformity to the law for law-independent reasons from compliance with the law qua law. When the law tells people to refrain from stealing, for example, many won’t steal even absent any threat of sanctions, not because they think that the law against stealing gives them any particular reason to refrain from stealing but rather because they believe that they have moral reasons not to steal anyway. Thus, since they likely wouldn’t have stolen anything even in the absence of this law, we can’t infer that the law qua law had any effect on their behaviour. Schauer identifies three types of reason that may be driving the behaviour of a person who conforms to a legal rule. First, she might believe that there are moral reasons, independent of the law, not to act in ways that would be inconsistent with the rule, as there may be moral reasons not to steal even in the absence of a law prohibiting stealing. Second, she might believe that she has self-interested reasons to engage in conforming behaviour because of the ways in which the law coerces compliance with its edicts. Finally, she might believe that the legal norm itself gives her a reason to conform to it. As Schauer puts it, she might resemble Hart’s ‘puzzled man’, one who wants to know what the law is because she believes that she ought to conform to its edicts ‘just because it is the law’ (45–46). More precisely, she might be

Economic Analysis of Contract Law from the Internal Point of View

Economic analysis of law has traditionally assumed that legal rules are or ought to be designed to maximize social welfare taking as given that legal subjects are like Holmes’ “bad man” — rational, self-interested agents who care about complying with the law only insofar as non-compliance exposes them to the risk of sanctions. This Article challenges this motivational assumption while keeping the standard economic framework otherwise intact on the grounds that while some legal subjects are, like Holmes’ bad man, “externalizers” of legal rules, others regard the law from the “internal point of view,” that is, they are “internalizers” of legal rules who are motivated to conform to legal rules apart from the consequences of defiance on a particular occasion. The Article derives specific doctrinal implications for contract law assuming that there are internalizers as well as externalizers in the subject population. It analyzes several contract law phenomena: the expectation principle, according to which a victim of a breach of contract is entitled to his expectation, and no more than his expectation; the penalty doctrine and stipulated damages clauses; the doctrine of willful breach; and the doctrine of contract modification. The resulting analysis shows that internalizers respond to these doctrines differently from externalizers and evaluates how the prescriptive implications of economic analysis for the design of contract law doctrines changes once we recognize that there are both internalizers and externalizers in the population. For example, the presence of internalizers in the subject population provides a justification for punishing some “willful breaches” more harshly than ordinary breaches. It also helps to justify the modern doctrine of contract modification.