Economic Analysis of corporate misconduct

REG522 Economic Analysis of corporate misconduct

Spring 2021

  • Topics

    This course provides an introduction to the microeconomic analysis of how liability rules can be used to optimally deter torts, crimes, and regulatory offenses. The course begins by examining how governments can use laws governing victim’s right to recover damages from people who harmed them accidentally to create optimal incentives for people engaged in risky activities to invest in precautions designed to deter risk. We will examine standard accidents, products liability and medical malpractice.  The next section will examine optimal use of criminal law to deter misconduct. The final section will consider whether, why and how liability should be imposed on corporations when risks were created by (or misconduct was committed by) employees of a company acting on the firm’s behalf—as is the case with products liability, environmental offenses, money laundering, and corruption. In this section, we first examine basic principal-agent models. We then examine why optimal deterrence requires the use of corporate liability and how corporate liability should be structured. We next examine, understand the value of, and critique the leading statutes governing non-trial corporate resolutions.  Finally, we will discuss corporate liability for securities fraud.

    The course is designed for PhD students enrolled in either an economics, business or finance program, or a program in law and economics. It also would be useful for law students who have studied economics.

  • Learning outcome

    Upon completing this course, the candidate will be able to:  

    Knowledge

    • Apply central concepts in the economics of torts and crime
    • Explain the economic purposes and optimal structure of corporate liability to govern torts, regulatory offenses and crimes

    Skills

    • Apply economic analysis of the use of liability rules to deter risky conduct when victims and potential injurers are in a market relationship: as with products liability and medical malpractice
    • Explain economic analysis of the deterrent effect of civil and criminal law as applied to individuals
    • Describe central economic models of how principals seek to induce agents to engage in the performance that maximizes principals’ welfare when agents’ performance is not observable

    General competence

    • Examine incomplete contracts
    • Explain why corporate liability for securities fraud has a different structure than corporate liability for other offenses
    • Point out the significance of plea bargaining/negotiated settlements in cases of corporate crime (i.e. non-prosecution agreements)

  • Teaching

    The course will be held digitally in Zoom in the week 25-27 May 2021.

    The course will be organized with eleven 90 min lectures held over a period of four days. In addition, students will conduct group work with a group presentation during lecture days. 

  • Restricted access

    There will be maximum 20 participants in the course. PhD students at NHH will be given priority. 

  • Recommended prerequisites

    The course is designed for PhD students enrolled in either an economics, business or finance program, or a program in law and economics. It also would be useful for law students who have studied economics. 

  • Requirements for course approval

    Students must pass a individual multiple choice digital test organized at a specific time on Tuesday 2 June. The test will address contents of the lectures only. The test will be digital (Wiseflow) and automatically assessed. Participants can take the test wherever they are as long as they are ready in the given time window and have good wifi connection. Students with a certain number of correct answers will pass the test. Those who fail will be given a new opportunity to take the test one week later.

  • Assessment

    Students will be evaluated on an individual (sole-authored) term paper with a 4000 word limit. 

    The topic with an outline and most important bibliography should be discussed with lecturers by Thursday 27 May. A draft term paper must be submitted by 1 July, and upon comments received soon thereafter, submitted again for a final check by 14 August. 

    In order to receive comments on the term paper and pass the course, each student must pass a multiple choice test organized a few days after the course (on contents of the lectures only). 

  • Grading Scale

    Grading: Pass / fail

  • Literature

    TBA

Overview

ECTS Credits
5
Teaching language
English.
Semester

This course will be offered in spring 2021.

Course responsible

Jennifer Arlen (Professor at New York University Law School (who is also affiliated with IRRR/NHH) and Tina Søreide (professor at IRRR/NHH)