Showing papers on "Principal (commercial law) published in 1986"

The Incentive Effects of Flat-Fee and Percentage Commissions for Real Estate Brokers

Abstract: This paper analyzes the incentive affects of flat-fee and percentage commission systems from the perspective of the economic theory of agency. Under a plausible set of assumptions the systems provide equivalent incentives. However, the relative desirability of the two systems depends upon the pricing strategy employed and factors specific to the individual. In general, neither system perfectly aligns the interests of the agent with those of the property-owner. A surprising result of the analysis is that the optimal listing price when an agent is employed may be below the first-best price. The first-best price, or residual maximizing solution to the principal-agent problem from the perspective of the property-owner, is the solution that would occur if the agent's interests were perfectly aligned with those of the principal. This study suggests that the use of a percentage versus a flat-fee commission may be due to information costs rather than price discrimination on the part of brokers.

Chapter 23 Agency and the market

Abstract: Publisher Summary A very widespread economic situation is that of the relation between a principal and an agent. Even in ordinary and in legal discourse, the principal–agent relation is significant in scope and economic magnitude. The chapter discusses that the common element is the presence of two individuals. One is to choose an action among a number of alternative possibilities. The action affects the welfare of the other, the principal, as well as that of the agent's self. The principal, at least in the simplest cases, has the additional function of prescribing payoff rules—that is, of determining in advance of the choice of action, a rule that obliges him or her as to what fee to pay as a function of his or her observations on the results of the action. The problem acquires interest only when there is uncertainty at some point, and, in particular, when the information available to the two participants is unequal. In technical language, the outcome is a random variable whose distribution depends on the action taken. The principal–agent theory is in the standard economic tradition. Both principal and agent are assumed to be making their decisions optimally in view of their constraints. Intended transactions are realized. The function of this theory has the dual aspect usual in economic theory; it can be interpreted both normatively and descriptively. It can also be interpreted as an attempt to explain observed phenomena in the empirical economic world, particularly exchange relations that are observed but not explained by more standard economic theory.

The congressional foundations of agency performance

Abstract: When Congress delegates a policy mandate to a regulatory agency, Congress acts as a principal, choosing the institutional arrangements, or the ‘rules of the game’ for agency decision making. Individuals in the agency, acting as agents, take the rules of the game as given and do the best they can within these institutional arrangements. In this paper we develop a simple model that relates the congressional choice of institutional arrangements to two underlying environmental factors — uncertainty and conflict. We suggest that uncertainty and conflict of interest lead Congress, in delegating, to prescribe a greater scope of permissable regulatory activity, a wider array of regulatory instruments, and more confining regulatory procedures. Increased scope and stronger instruments tend to broaden the overall discretionary authority of the agency, while more confining procedures tend to narrow it. We conjecture that with increased uncertainty or conflict the narrowing tendency more than offsets the broadening tendency, for a net decrease in the agency's overall discretionary authority. Lastly, we argue that the performance of a regulatory agency in fulfilling its mandate is determined in large measure by the foundations Congress constructs for the implementation of delegated authority.

The Welfare Implications of Costly Litigation in the Theory of Liability

Abstract: One of the principal results in the economic theory of liability is that, assuming litigation is costless, the rule of strict liability with compensatory damages leads the injurer to choose the socially appropriate level of care. This paper reexamines this result when litigation is costly. It is shown that strict liability with compensatory damages generally leads to a socially inappropriate level of care and to excessive litigation costs. Social welfare can be increased by adjusting compensatory damages upward or downward, with the desired direction depending on the effect of changes in the level of liability on the injurer's decision to take care and on the victim's decision to bring suit.

The Myth of the Nomad in Property Law

Abstract: Sir William Blackstone's hyperbolic defense of the common law rights of Englishmen to private property,1 drawn from the immutable law of nature,2 was a comfort to conservative lawyers in the early American republic as a reasoned philosophical and legal defense of property against the uncertainties of John Locke's social contract.3 The seeds of Jacksonian democracy, in which popular sovereignty went hand-in-hand with the people's self-evident right to the pursuit of happiness,4 threatened to relativize and erode the social position of the propertied class.5 In this situation American lawyers vigorously asserted absolute rights to property that could transcend the vagaries of politics. "The title of our lands," wrote Jesse Root proudly in 1798, "is free, clear and absolute, and every proprietor of land is a prince in his own domains, and lord paramount of the fee."6 In the first decades of the Republic Blackstone's Commentaries was the principal sourcebook for American lawyers and judges to learn the common law of England.7 The interpretations of Black-

Liability of Parent Corporations for Hazardous Waste Cleanup and Damages

Abstract: In its haste to address the great threat to public health and welfare posed by hazardous waste disposal, Congress did not specifically state whether parent corporations of responsible parties should be brought within the purview of CERCLA. This articles shows that economic considerations, reflected in CERCLA, favor imposing liability on parent corporations of insolvent responsible parties. A rule limiting liability would frustrate the government’s enforcement efforts and afford parent corporations a “safe harbor” for conducting overly risky hazardous waste disposal activities. To effectuate the principal purposes of CERCLA–prompt and effective cleanup of unsafe disposal sites and imposition of liability upon all responsible parties–courts should pierce the corporate veils of insolvent subsidiaries. Federal common law principles empower courts to impose liability upon parent corporations in order to implement fully Congress’s manifest intent and purpose.

On Analytical Jurisprudence

Abstract: This chapter deals with analytical jurisprudence and with the question of the proper range and content of studies in a law curriculum. As its argument in due course discloses, the text in its present form1 derives from a paper read at the College of Law of the University of Saskatchewan. In taking as its principal focus of discussion the topic of analytical jurisprudence, it deliberately raises questions about legal education and study in a pointed way, for it has never been and is not now an uncontroversial question whether this is a subject worthy of pursuit in law schools or at all. Even if we restrict our attention to legal education in the English speaking countries alone, we find that jurisprudence or the general theory or philosophy of law is by no means universally taken to be a central part of the legal curriculum. In many places it is relegated to the fringes of legal study, an optional course reserved for a few harmless enthusiasts.

Legal Aspects of Blood Banking: an American Perspective

Abstract: This paper seeks to provide a legal context within which to view recent developments and future challenges in blood banking. Legal and regulatory systems exist to further two principal goals in relation to blood banking. One is that of assuring that a safe and adequate supply of blood and blood components is available. The other is that of ensuring that both donors and recipients are treated in accord with state-of-the-art professional standards, without negligence, and with respect for their rights as patients.