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 The Basic Structure of Repeated Games with Perfect Monitoring

George J. Mailath and Larry Samuelson

in Repeated Games and Reputations: Long-Run Relationships

This chapter introduces the basic concepts of a stage game, repeated game with perfect monitoring, subgame-perfect equilibrium, and the one-shot deviation principle; introduces the use of automata to ... More

This chapter introduces the basic concepts of a stage game, repeated game with perfect monitoring, subgame-perfect equilibrium, and the one-shot deviation principle; introduces the use of automata to represent strategy profiles; and introduces the concepts of decomposability, enforceability, and self-generation. Readers can either proceed to the next chapter, or if particularly interested in games with public monitoring, proceed directly to Chapter 7.Less

 The Basic Structure of Repeated Games with Imperfect Public Monitoring

George J. Mailath and Larry Samuelson

in Repeated Games and Reputations: Long-Run Relationships

This chapter provides the basic technical tools for working with games of imperfect public monitoring, with games of perfect monitoring as a special case. It introduces the central notions of a ... More

This chapter provides the basic technical tools for working with games of imperfect public monitoring, with games of perfect monitoring as a special case. It introduces the central notions of a public strategy and perfect public equilibrium (PPE), and shows that PPE has a recursive structure. Readers particularly interested in imperfect public monitoring can move straight from Chapter 2 to this chapter. This chapter develops and illustrates the ideas of decomposability, enforceability, and self-generation, the basic tools for working with games of incomplete information, as well as presenting the bang-bang theorem.Less

 The Folk Theorem with Imperfect Public Monitoring

George J. Mailath and Larry Samuelson

in Repeated Games and Reputations: Long-Run Relationships

This chapter shows that in many situations with patient players, the payoffs bounds from Chapter 8 are tight. It then proves various folk theorems for games of public monitoring, including games with ... More

This chapter shows that in many situations with patient players, the payoffs bounds from Chapter 8 are tight. It then proves various folk theorems for games of public monitoring, including games with a product structure and extensive form games. The chapter discusses the enforceability, identifiability, and rank conditions on the monitoring technology required for the folk theorem, and finally considers games of symmetric incomplete information.Less

Information, Finance, and Markets: The Architecture of Allocative Mechanisms 1

B. Greenwald and J. E. Stiglitz

in Understanding Industrial and Corporate Change

This chapter provides a formal model for incorporating finance within the theory of the firm and for a more nuanced reading of the evolution of capitalistic economies. Financial markets emerged as ... More

This chapter provides a formal model for incorporating finance within the theory of the firm and for a more nuanced reading of the evolution of capitalistic economies. Financial markets emerged as mechanisms for ensuring the fulfilment of promises made for a return in the future in exchange for money today. The ensuing difficulties were met in part by legal changes, such as the development of limited liability and enforceable fraud standards, along with pragmatic advances in such areas of accountability as accountancy and auditing. Nonetheless, tensions remain due largely to information asymmetry problems and enforcement of difficulties. Given differing rates of return across sectors, the firm takes on the role of an important financial institution. An evolutionary process results in which deficiencies in the market give rise to new contract forms and their exploitation by some participants in the market, thus producing still newer arrangements. The evolution of financial instruments necessarily remains intertwined with the evolution of the firm.Less

New Accounting for Goodwill: Application of American Criteria from a German Perspective

Walther Busse von Colbe

in The Economics and Politics of Accounting: International Perspectives on Trends, Policy, and Practice

A critical examination is made, from a German perspective, of accounting for purchased goodwill using the new (American) Financial Accounting Standards Board (FASB) standard: Statement of Financial ... More

A critical examination is made, from a German perspective, of accounting for purchased goodwill using the new (American) Financial Accounting Standards Board (FASB) standard: Statement of Financial Accounting Standards (SFAS)142 (Goodwill and other intangible assets). It is argued that SFAS 142 provides substantial room for manipulation, which raises doubts about its enforceability. The various sections of the chapter introduce some of the economic criteria that lend structure to the ongoing debate on accounting for goodwill – criteria that especially address the question of whether the impairment-only approach or the traditional amortization approach is more appropriate for satisfying investors’ information requirements. The following criteria are considered: relevance for capital markets; reliability of the accounting numbers; verifiability; comparability; conservatism; consistency/compatibility with Generally Accepted Accounting Principles (GAAP); suitability as a basis for dividend payout. Influence on management compensation/capital budgeting is also briefly discussed.Less

Moral Rights

Hillel Steiner

David Copp (ed.)

in The Oxford Handbook of Ethical Theory

This chapter explores the nature of moral rights by examining their formal structure, their status within morality, and rival theories concerning their content. Moral rights are construed as ones ... More

This chapter explores the nature of moral rights by examining their formal structure, their status within morality, and rival theories concerning their content. Moral rights are construed as ones which legal systems ought to embody. As such, it is argued that consideration of the possibility of conflicts between rights and other moral values, and among rights themselves, serves to illuminate issues surrounding their content and moral status.Less

The Limits of Uncertainty

Adrian Vermeule

in Mechanisms of Democracy: Institutional Design Writ Small

This chapter indicates the limits of the veil mechanism by discussing three tradeoffs: (1) between impartiality and information; (2) between impartiality and motivation; and (3) between impartiality ... More

This chapter indicates the limits of the veil mechanism by discussing three tradeoffs: (1) between impartiality and information; (2) between impartiality and motivation; and (3) between impartiality and ex post enforceability. A heavily veiled government might possess too little information to act effectively. Less intuitively, its officials might lack the motivation to introduce many beneficial projects, and might thus display an insufficient level of activity or energy.Less

The Transformation of International Law

Gus Van Harten

in Investment Treaty Arbitration and Public Law

This chapter argues that the emergence of the system of investment treaty arbitration, when viewed against the canvass of international law, marks a major transformation in international ... More

This chapter argues that the emergence of the system of investment treaty arbitration, when viewed against the canvass of international law, marks a major transformation in international adjudication. This is because investment treaties uniquely combine various innovative features of international adjudication to formulate a singularly far-reaching and potent system that uses arbitration to review and control states. The elements of investment treaty arbitration, and thus of the wider adjudicative power granted to arbitrators, are examined. It is argued that they establish investment treaty tribunals as the closest the world has come to an international court that has comprehensive jurisdiction over individual claims in the regulatory sphere.Less

BCR and Contract Law

Lokke Moerel

in Binding Corporate Rules: Corporate Self-Regulation of Global Data Transfers

This chapter discusses some contractual issues in light of the requirement that Binding Corporate Rules (BCR) should be internally binding on the group companies and employees of the multinational, ... More

This chapter discusses some contractual issues in light of the requirement that Binding Corporate Rules (BCR) should be internally binding on the group companies and employees of the multinational, and externally binding for the benefit of the beneficiaries of BCR. The latter requires discussion of the enforceability of unilateral undertakings by the beneficiaries of BCR. Transnational Private Regulation (TPR) is often effectuated through contractual ‘supply chain management’, a solution which is also part of the BCR regime. Supply chain management also raises issues of enforceability by the beneficiaries of these contracts, which are of equal relevance to BCR. How the various supply chain issues can be best addressed in BCR is discussed.Less

The Kinds of Agreements not Enforced: Substantive Limitations on Enforceability

Stephen A. Smith

in Contract Theory

This chapter examines four possible justifications for the existence of substantive limitations on the enforceability of agreements: (i) the punishment justification: (ii) the dignity of the courts ... More

This chapter examines four possible justifications for the existence of substantive limitations on the enforceability of agreements: (i) the punishment justification: (ii) the dignity of the courts justification; (iii) the no obligation justification; and (iv) the wrongdoing principle justification. In evaluating these justifications, the chapter considers how they answer three closely related questions about the contract law rules on unenforceable agreements. First, what justification is there for courts to disregard the principle of freedom of contract so as to refuse to enforce agreements that are prima facie valid? Second, what sort of connection is required between an ‘objectionable’ activity and an agreement so that the courts will refuse to enforce the agreement? Third, which kinds of activities qualify as undesirable, immoral, or objectionable?Less

Cosmopolitan Justice and Rightful Enforceability

Laura Valentini

in Cosmopolitanism versus Non-Cosmopolitanism: Critiques, Defenses, Reconceptualizations

The liberal debate on global justice has long been polarized between cosmopolitans, who champion global equality, and statists, who defend global sufficiency. Interestingly, little attention has been ... More

The liberal debate on global justice has long been polarized between cosmopolitans, who champion global equality, and statists, who defend global sufficiency. Interestingly, little attention has been given to what these outlooks have in common: a focus on justice. Justice differs from other types of values in that it sets out rightfully enforceable entitlements. Once this is appreciated, however, cosmopolitanism and statism can be shown to offer inadequate accounts of global justice. Since the principles they advocate are reasonably contested, directly enforcing them on dissenting others would violate the liberal commitment to equal respect for persons. When the demands of justice are reasonably disagreed upon, as they are at the global level, conflicts over them need to be procedurally adjudicated. The chapter concludes that taking the enforceability of justice seriously leads us to advocate global outcome sufficiency, and global procedural equality, thereby steering a middle course between statism and cosmopolitanism.Less

Why Enforce Contracts?

Nancy S. Kim

in Wrap Contracts: Foundations and Ramifications

This chapter explains why contracts are enforced. Specifically, it discusses individualist/deontic theories, consequentialist theories, and multivalue theories of contract law. Individual autonomy or ... More

This chapter explains why contracts are enforced. Specifically, it discusses individualist/deontic theories, consequentialist theories, and multivalue theories of contract law. Individual autonomy or “will theorists” emphasize self-determination and freedom of contract. Consequentialism focuses on the societal benefits of contracting. Multivalue theories of contract law explain that the justification for contract law derives from more than one societal value or objective.Less

The Nature of Investment Disciplines

Ursula Kriebaum

in The Foundations of International Investment Law: Bringing Theory into Practice

This chapter compares and contrasts the three principal international regimes for the protection of property rights: diplomatic protection, investment law, and human rights law. It examines their ... More

This chapter compares and contrasts the three principal international regimes for the protection of property rights: diplomatic protection, investment law, and human rights law. It examines their sources of law, the beneficiaries and parties, access to dispute settlement, and enforceability. The differences between the regimes are sometimes profound. In diplomatic protection and human rights law, for instance, international courts and tribunals have adopted the basic contours of the rights pertaining to the ownership of shares as it exists in domestic law, such that a shareholder cannot bring a claim for the diminution of the value of its shares save in exceptional circumstances. This approach has not been followed in investment treaty arbitration, where such claims are routinely accepted as admissible. Nationality plays an important role for the jurisdiction of the tribunal or the admissibility of claims in the context of investment law and diplomatic protection but not in human rights law. These differences illustrate how much care must attend the transplantation of solutions found in diplomatic protection and human rights law into investment law.Less

Arbitral Awards

Hong-Lin Yu

in Commercial Arbitration

This chapter focuses on the enforceability of arbitral awards in Scotland. Most, if not all, arbitrating parties choosing arbitration as the means of resolving their disputes want a speedy and an ... More

This chapter focuses on the enforceability of arbitral awards in Scotland. Most, if not all, arbitrating parties choosing arbitration as the means of resolving their disputes want a speedy and an efficient way to reach a binding decision between them and, ultimately, to have an enforceable arbitral award. To ensure the enforceability of an arbitral award, three issues must be addressed: procedural formalities required in the relevant arbitration laws are fulfilled; the award does not fall into the grounds for setting aside; and/or the recognition and enforcement procedures are fulfilled under the New York Convention 1958. The chapter discusses all three aspects, which are covered in Part 6 of the Scottish Arbitration Rules and in ss 11–15 and ss 18–22 of the Arbitration (Scotland) Act 2010.Less

Contracts and Investment in Natural Resources

William Hogan, Federico Sturzenegger, and Laurence Tai

in The Natural Resources Trap: Private Investment without Public Commitment

The objective of this book is not to discuss whether natural resources turn out to be good or bad, but rather to address a related issue: the problem that countries face in setting up a credible and ... More

The objective of this book is not to discuss whether natural resources turn out to be good or bad, but rather to address a related issue: the problem that countries face in setting up a credible and stable regime for private investment to exploit these resources. Even if governments have the capacity to develop the resources on their own, many lack the technical knowledge to do so or the large sums of capital required to undertake the investments. For these reasons, countries may rely on multinational corporations (MNCs) to discover and develop these resources. In doing so, they become a host country (HC) to a foreign firm, and the assistance of a second party introduces an attendant conflict of interest. A central and persistent problem here is the limit on the enforceability for contracts with a sovereign government, unlike contracts between private parties.Less

A Project of Uneven Liberalization

Amy A. Quark

in Global Rivalries: Standards Wars and the Transnational Cotton Trade

Chapter three demonstrates that projects to create new institutions are often trial-and-error, ad hoc efforts, as institutionalist scholars suggest, but they are also driven by competitive efforts to ... More

Chapter three demonstrates that projects to create new institutions are often trial-and-error, ad hoc efforts, as institutionalist scholars suggest, but they are also driven by competitive efforts to shape the terrain of market competition. Actors create new institutions to solve the problems they face given their historically and spatially specific position within patterns of capital accumulation. Moreover, the efficacy of these institutions is limited by the patterns of conflict that they generate. This chapter traces the origins of the contemporary struggle among a U.S.-led coalition of the state, transnational merchants, and cotton producers, its rivals in China, and more marginalized actors. It explores the rise of a US-led neoliberal project in the 1970s and the efforts of the US state and transnational merchants to recast quality standards and dispute settlement to privilege their preferences in this liberalizing environment. As these U.S. institutions came to be seen as de facto global institutions, however, they generated new patterns of conflict, which limited the enforceability of these rules.Less

What Justice Is

Madison Powers

in Structural Injustice: Power, Advantage, and Human Rights

The overarching question in this chapter is, what makes this theory—indeed, any theory—a theory of justice? Five criteria prominently discussed in the literature—special importance, stringency, ... More

The overarching question in this chapter is, what makes this theory—indeed, any theory—a theory of justice? Five criteria prominently discussed in the literature—special importance, stringency, claimability, specificity, and rightful enforceability—are examined. The position defended in this book is developed with respect to each criterion. In addition, two norms of structural unfairness pertaining to differentials of power and advantage are distinguished, as are the ways in which each differs from human rights norms. We look first at the ordinary language used in situations of everyday experience. We then extrapolate from basic intuitions about relatively simple patterns of unfairness in interpersonal relationships to gain a better understanding of fairness norms, applicable in more complex contexts where an array of institutions and social practices structure relationships between social groups.Less

Policy in an Economy with Balance Sheet Effects

Aaron Tornell (ed.)

in Preventing Currency Crises in Emerging Markets

This chapter assesses the policy responses to crisis in the presence of enforceability problems, bailout problems, and balance sheet effects. Systemic bailout guarantees are a second-best instrument ... More

This chapter assesses the policy responses to crisis in the presence of enforceability problems, bailout problems, and balance sheet effects. Systemic bailout guarantees are a second-best instrument to raise investment in emerging economies. They have also investment enhancing effects in the presence of risk. Risky debt plays a useful role in promoting investment. There is a need to improve the prudential regulation concurrently with privatization and financial reforms. Bankers and regulators have incentives to believe that negative news is more transitory than it actually is and to make predictions about the banks' portfolios that are more optimistic than is warranted by the facts. The effect of this misperception is an evergreening of banks' balance sheets. It is noted that not every bailout-guarantee scheme will result in higher growth. It is important that authorities can commit to refrain from granting bailouts on an idiosyncratic basis.Less

Forum Selection Clauses and Arbitration Clauses

Symeon C. Symeonides

in Choice of Law

Part I of this chapter discusses forum-selection (or choice-of-forum) clauses. In particular, it examines the question of which state’s law governs the enforceability and interpretation of forum ... More

Part I of this chapter discusses forum-selection (or choice-of-forum) clauses. In particular, it examines the question of which state’s law governs the enforceability and interpretation of forum selection clauses when the action is filed in the chosen court or in another court, and depending on whether or not the contract also contains a choice-of-law clause. After describing the divisions among courts on this question, it takes a position on the proper answer and explains why. It concludes with a discussion of the doctrine of separability or severability of the forum selection clause. Part II discusses arbitration clauses in both interstate and international contracts, focusing primarily on which law governs the enforceability and interpretation of arbitration clauses. It describes the Supreme Court’s strong pro-arbitration stance and the state courts’ efforts to protect weak parties, such as consumers or employees.Less

Punishment in the executive suite: Moral responsibility, causal responsibility, and financial crime

Mark R. Reiff

in Just Financial Markets?: Finance in a Just Society

Despite the enormity of the financial losses flowing from the 2008 financial crisis and the outrageousness of the conduct that led up to it, almost no individual involved has been prosecuted for ... More

Despite the enormity of the financial losses flowing from the 2008 financial crisis and the outrageousness of the conduct that led up to it, almost no individual involved has been prosecuted for criminal conduct, much less actually gone to prison. This chapter argues that the failure to punish those in management for their role in this misconduct stems from a misunderstanding of the need to prove that they personally knew of this wrongdoing and harbored an intent to defraud. Not only would negligence be a sufficient legal and moral basis for imposing terms of imprisonment in these cases, mere causal responsibility would also be enough, for causal responsibility has embedded in it all we need to find those causally responsible morally responsible too, and once some basis for moral responsibility is established, the imposition of terms of imprisonment is both legally possible and morally just.Less