Omri Ben-Shahar Research Articles

Tribute to Omri Ben-Shahar

Previous articleNext article FreeTribute to Omri Ben-ShaharWilliam H. J. Hubbard and Edward R. MorrisonWilliam H. J. Hubbard Search for more articles by this author and Edward R. Morrison Search for more articles by this author PDFPDF PLUSFull Text Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinked InRedditEmailQR Code SectionsMoreAs of this issue, and after 8 years of service, Omri Ben-Shahar is stepping down as an editor of the Journal of Legal Studies. During our 3 years as his fellow editors, Omri was our wise and indefatigable colleague. He brought to the journal his penetrating insight, always able to identify core insights in submissions and working tirelessly with authors (and his fellow editors) to unearth, clarify, and sharpen the insights. He set an editorial standard to which we aspire.Omri shepherded the JLS through a period of growth. Submissions have steadily risen: during his tenure as editor, the JLS published 165 articles from well over 1,000 individual submissions plus five conferences. And we have witnessed greater methodological diversity and sophistication in submissions. For the JLS, these welcome developments have presented a particular challenge: the increasing sophistication of theoretical and empirical methodologies in social science tends to make interdisciplinary work in law less accessible to broad audiences. In meeting this challenge, Omri firmly maintained an editorial vision that theoretical frameworks and empirical strategies can and should be described with clear intuition and plain language (even if also articulated with formal rigor, of course). Omri brought to the JLS the same emphasis on big ideas, theory-driven insights, and an embrace of empiricism that characterizes his own innovative and influential scholarship.It has been a joy and privilege for us to serve as editors of the JLS with Omri Ben-Shahar. We miss him. Previous articleNext article DetailsFiguresReferencesCited by The Journal of Legal Studies Volume 46, Number 1January 2017 Sponsored by The University of Chicago Law School Article DOIhttps://doi.org/10.1086/692334 © 2017 by The University of Chicago. All rights reservedPDF download Crossref reports no articles citing this article.

Health Care Quality Reporting: A Failed Form of Mandated Disclosure?

The recently published book by Professors Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure, imparts valuable lessons and offers food for thought for disclosurites of all sorts. The book's sensible arguments and voluminous evidence cutting across a broad range of regulatory areas should lead readers to question the advisability of mandated disclosure as a regulatory strategy. At the same time, however, the broad sweep of their work constrains their ability to offer comprehensive assessments of the advisability of particular disclosure policies, leaving readers to wonder whether there are exceptions to the authors' general claim, and if so, what form they might take. In this essay, I explore the possibility that quality reporting might be just such an exception. While quality reporting suffers from many of the problems that Ben-Shahar and Schneider have identified, evidence suggests quality reporting can make a difference. But assessing the net impact of quality reporting is no easy task. The policy objectives underlying governmental quality reporting initiatives are significantly broader than the goal at the heart of Ben-Shahar's and Schneider's analysis, complicating efforts to assess the initiatives' success. The initiatives' costs are also challenging to evaluate, in part because they support not just public reporting, but also other benefit-producing activities. After discussing these and other complexities that highlight the limits of Ben-Shahar's and Schneider's analysis, the essay calls for the development of a framework that lays out key characteristics of disclosure mandates and the environments in which they operate, so that we can develop a better understanding of the characteristics associated with mandate success.

Dismissing Disclosure?

This essay responds to a new book by Omri Ben Shahar and Carl E. Schneider, entitled MORE THAN YOU WANTED TO KNOW: THE FAILURE OF MANDATED DISCLOSURE (Princeton, 2014). The book is an elaborate disclosure of why disclosure fails. It is hard to disagree with the fact that widespread deficits in consumer reading, understanding and decisionmaking undermine the efficacy of disclosures, and the book provides plenty of data to show this. But the authors do not much confront the fact that many mandates for disclosures are a response to what happens when firms are free to design their own fine print. The same consumer decisionmaking deficits the authors here elaborate exist when the disclosure (allegedly contractual) is created by private firms; and firms take advantage of those deficits. If mandated disclosure is abandoned, as the authors recommend, do the authors think recipients of bad boilerplate should just be on their own? The authors did not consider that question as part of their project in this book.

What Boilerplate Said: A Response to Omri Ben-Shahar (and a Diagnosis)

This essay responds to Omri Ben-Shahar’s review of my book, Boilerplate: The Fine Print, Vanishing Rights, and the Rule of Law (Princeton 2013). Ben-Shahar’s review (available at: http://ssrn.com/abstract=2255161) unfortunately does not convey the nature of this book to possible readers. His preconceptions – reflecting primarily what I call “old-school Chicago”--apparently caused him to believe that some strong version of “autonomy” was the focus of my book. Instead, the book’s purpose is to gather together a broad range of ideas relevant to boilerplate, in order to encourage readers to consider opportunities for improving our theory and practice. It makes detailed suggestions for improving our treatment of boilerplate, including chapters on how judges could improve on unconscionability and public policy decisions, how market initiatives might be harnessed to cabin boilerplate excesses, and how bad boilerplate might be regulated by tort law rather than contract law. Boilerplate does investigate the disjuncture between contract theories’ various commitments to voluntariness and the realities of contemporary practice with respect to mass-market boilerplate; but it does so as backdrop to its main purpose.

Duress as Rent Seeking

The doctrine of duress allows a party to a contract to avoid its contractual obligations when it was induced to enter that contract by a wrongful threat while in a dire position that leaves it no choice but to enter the contract. Although threats of criminal or tortious conduct clearly are wrongful, under the doctrine of “economic duress,” courts have held that other threats can be wrongful and hence the basis of a duress defense. Courts, however, have not developed a coherent understanding of what makes such non-criminal and non-tortious threats wrongful. This Article proposes that a threat should be wrongful when it is motivated by rent-seeking. Other scholars have previously proposed tests to identify wrongful threats, but they have not focused on a rent-seeking principle. Oren Bar-Gill and Omri Ben-Shahar, for instance, have proposed that an economic threat is wrongful when the threat is not credible. Steve Shavell has suggested that a threat is wrongful when it seeks to exploit a monopoly position of the threat-maker that was created by its own harmful conduct. Our criterion differs from that of Bar-Gill and Ben-Shahar by specifying the circumstances under which a threat that is made credible by investment should be considered wrongful. Our criterion also differs from that of Shavell because we advocate that a threat should not be deemed wrongful even in some situations where the threat-maker created the dire situation that makes the threatened party vulnerable to the threat. We also carve out an exception to rent-seeking for contract negotiation in which a party turns down an offer that would provide it economic value. Although such conduct technically is rent-seeking, such negotiation provides economic value because it is the least cost mechanism for parties to determine whether a potential contract will create economic surplus. The article then discusses the implications of our criteria for settlements of contract disputes and contract modification.

The Limits of Bargaining Power as an Interpretive Aid

This is a short response to a recent essay by Omri Ben-Shahar (A Bargaining Power Theory of Default Rules, 109 Colum. L. Rev. 396 (2009)). It is part of a broader forthcoming analysis of contract interpretation.Professor Ben-Shahar argues that evidence of bargaining power should inform courts when they fill contractual gaps. I make several observations in response: (1) a significant portion of Ben-Shahar's argument applies not to gaps but to other kinds of contractual questions, and it has less force for gaps; (2) reliable evidence about bargaining power is often unavailable; (3) contracts should not be interpreted, generally speaking, based on an analysis of how parties have divided contractual surplus, because an intent regarding general surplus division does not follow from evidence regarding specific surplus divisions; and (4) even when one party is strong enough to apparently dictate terms, there is no good general reason to allow it to dictate specific terms ex post. In principle, my analysis is not meant to refute Professor Ben-Shahar's general line of reasoning but to suggest that bargaining power, though important theoretically, is unlikely to be useful as an independent interpretive aid in contract law.

A Comment on ‘An Ex-Ante View of the Battle of the Forms: Inducing Parties to Draft Reasonable Terms’ by Omri Ben-Shahar

This paper comments on Omri Ben Shahar's article “ An Ex-Ante View of the Battle of the Forms: Inducing Parties to Draft Reasonable Terms.” In that article, the author focuses on one type of ex ante effect of the battle of the forms: the incentive to draft reasonable boilerplate terms. He argues that the experience with the battle-of-the-forms rule under the CISG reinforces what we already know, that existing legal solutions do not provide any incentive for the parties to draft reasonable forms. He also suggests that the goal of inducing parties to draft reasonable terms can be significantly promoted by a third rule, a variant of the “best-shot” rule proposed by Victor Goldberg. Under this version, labeled the “reasonable-shot” rule, the court would resolve the battle of the forms by choosing the form that contains the more efficient terms. In this paper, I argue that Omri Ben-Shahar's thesis, while extremely interesting and provocative, may overlook other aspects of this complex problem. In particular, I suggest that the implementation of the proposed normative approach would not necessarily lead to the desired effects, and it may also significantly increase the level of transaction costs.

Contracts. Only with Consent

My friend and former colleague Omri Ben-Shahar has established a reputation for providing nuanced and well-grounded applications of economic analysis to important problems of contract law. In recent years, he has undertaken the ambitious task of exploring a significant topic at the boundary of contract law: liability for problems that arise out of efforts to form a contract. The essay to which I reply, Contracts Without Consent: Exploring a New Basis for Contractual Liability, is his second work on that topic, following his 2001 article with Lucian Bebchuk entitled Precontractual Reliance. Collectively, these pieces provide a comprehensive analysis of the relationship between opportunistic behavior and contract law. My goal in this reply is not to challenge that analysis directly, but rather, to test its boundaries. As a thematic matter, I discuss the practical domain in which the proposed new basis for contractual liability is useful and examine the plausibility of the doctrinal solutions that Ben-Shahar recommends. I first address the propriety of using a single regime to resolve preconsensual and postconsensual problems. I then consider whether the characterization of Ben-Shahar’s proposal as a default rule responds to the concerns that I raise in the first part of my discussion.

The Puzzle of "Ex Ante Efficiency": Does Rational Approvability Have Moral Weight?

t Professor, University of Pennsylvania Law School. Many thanks to Daniel Farber, Eric Orts, the participants in the University of Pennsylvania Law School Symposium on Preferences and Rational Choice, and my interlocutors at an ad hoc Penn Law workshop for their comments. Special thanks to Stephen Perry for his detailed, written comments. I A recent and visible attempt by two prominent law and economics scholars to specify the discipline's appropriate methodology explicitly defends, and at many junctures deploys, the criterion of ante efficiency. See LOUIS KAPLOW & STEVEN SHAVELL, FAIRNESS VERSUS WELFARE 437-43 (2002) (arguing for the ante perspective). A full assessment of the role that ante efficiency, in one sense or another, has played within law and economics is well beyond the scope of this Article. It seems clear, however, that this concept (in various specific formulations) has been quite important for this scholarly tradition. For recent examples of law and economics work that, in evaluating legal doctrines or other legal institutions, explicitly invokes the criterion of ex ante efficiency or ex ante welfare maximization (a criterion that is, again, specifiable in various ways), see StephenJ. Choi & Eric L. Talley, PlayingFavorites with Shareholders, 75 S. CAL. L. REV. 271 (2002); Robert Cooter & Ariel Porat, AntiInsurance, 31 J. LEGAL STUD. 203 (2002); Lucian Arye Bebchuck, Property Rights and Liability Rules: The Ex Ante View of the Cathedral, 100 MICH. L. REV. 601 (2001); Barry Adler et al., Regulating Consumer Bankruptcy: A Theoretical Inquiry, 29 J. LEGAL STUD. 585 (2000); Yongmin Chen, Promises, Trust, and Contracts, 16J.L. ECON. & ORG. 209 (2000); Ian Ayres & Kristin Madison, Threatening Inefficient Performance of Injunctions and Contracts, 148 U. PA. L. REV. 45 (1999); Lucian Arye Bebchuck & Andrew T. Guzman, An Economic Analysis of Transnational Bankruptcies, 42 J.L. & ECON. 775 (1999); Yeon-Koo Che & Alan Schwartz, Section 365, Mandatory Bankruptcy Rules and Inefficient Continuance, 15 J.L. ECON. & ORG. 441 (1999); Omri Ben-Shahar, Should Products Liability Be Based on Hindsight?, 14J.L. ECON. & ORG. 325 (1998). It also bears noting that Richard Posner's (in)famous defense of maximization invoked an ante perspective by arguing that judicial use of the wealth-maximization norm would, hypothetically, be consented to by (almost) all actors choosing under conditions of uncertainty. See RICHARD A. POSNER, THE ECONOMICS OFJUSTICE 88-115 (1981) (exploring the ethical and political basis of wealth maximization).

Eroding Entitlements as Litigation Commitment

This Comment on Omri Ben-Shahar's excellent article makes two points: 1. Entitlements might be more valuable under an erosion rule than under a no-erosion rule. 2. In contractual settings, any observed irrelevance is likely to be the product of forces that are independent of Omri BenShahar's 'itigation effect. But before discussing these two issues, let me briefly reformulate Ben-Shahar's contribution.' First, erosion rules can give rise to an antierosion effect because erosion rules are a litigation commitment device that helps entitlement holders commit to prosecuting a broader class of opportunistic breaches. In BenShahar's model, erosion is caused by promisors who intentionally chisel on their duties, knowing, because of the costs of litigation, that the promisees cannot credibly threaten to sue. Second, Ben-Shahar's irrelevance claim is both stronger and weaker than he acknowledges. The irrelevance claim is stronger, because his model shows not just that erosion costs will be the same under different erosion rules, but that we know that these costs will always be exactly equal to litigation costs saved. The promisors will always chisel to the point where the promisee is almost indifferent between paying litigation costs and swallowing the erosion costs. The irrelevance claim is weaker than Ben-Shahar suggests because, while total erosion costs stay the same, different erosion rules produce different profiles (or cash flows) of erosion. The model predicts that no-erosion rules will produce constant amounts of erosion in each period, but that erosion rules will produce increasing amounts of erosion in each period (less erosion than under a no-erosion rule in early periods and more erosion than under a no-erosion rule in later periods). These different erosion profiles predicted by the model provide an important

Precontractual Investigation as an Optimal Precaution Problem

Previous articleNext article No AccessPrecontractual Investigation as an Optimal Precaution ProblemRichard CraswellRichard Craswell Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by The Journal of Legal Studies Volume 17, Number 2Jun., 1988 Sponsored by The University of Chicago Law School Article DOIhttps://doi.org/10.1086/468135 Views: 11Total views on this site Citations: 29Citations are reported from Crossref Copyright 1988 The University of ChicagoPDF download Crossref reports the following articles citing this article:Albert H. Choi and George Triantis Contract Design When Relationship-Specific Investment Produces Asymmetric Information, The Journal of Legal Studies 50, no.22 (Nov 2021): 219–260.https://doi.org/10.1086/716173Johan N. M. Lagerlöf, Christoph Schottmüller Facilitating Consumer Learning in Insurance Markets: What Are the Welfare Effects?, The Scandinavian Journal of Economics 120, no.22 (Mar 2018): 465–502.https://doi.org/10.1111/sjoe.12231Jan H. Dalhuisen What Does the Transnationalisation of the Commercial Contract Mean? Is There a New Model and Are There Minimum Standards? Is There a Law and Economics Perspective?, (Nov 2018): 27–50.https://doi.org/10.1007/978-3-319-95969-6_2Tess WilkinsonnRyan, David A. Hoffman Intuitions About Contract Formation, SSRN Electronic Journal (Jan 2014).https://doi.org/10.2139/ssrn.2402285Xinhui Wang, Xianyu Wang, Yingsheng Su Wholesale-price contract of supply chain with information gathering, Applied Mathematical Modelling 37, no.66 (Mar 2013): 3848–3860.https://doi.org/10.1016/j.apm.2012.07.007Johan N. M. Lagerllf, Christoph Schottmmller Facilitating Consumer Learning in Insurance Markets - What Are the Welfare Effects?, SSRN Electronic Journal (Jan 2013).https://doi.org/10.2139/ssrn.2378768Zev J. Eigen When and Why Individuals Obey Contracts: Experimental Evidence of Consent, Compliance, Promise, and Performance, The Journal of Legal Studies 41, no.11 (Jul 2015): 67–93.https://doi.org/10.1086/664688Omri Ben-Shahar and Eric A. Posner The Right to Withdraw in Contract Law, The Journal of Legal Studies 40, no.11 (Jul 2015): 115–148.https://doi.org/10.1086/658403 Xinhui Wang, Xianyu Wang Supply chain contracts with endogenous information structure, (Dec 2010): 671–674.https://doi.org/10.1109/ICISE.2010.5689509Omri Ben-Shahar, Eric A. Posner The Right to Withdraw in Contract Law, SSRN Electronic Journal (Jan 2010).https://doi.org/10.2139/ssrn.1569753Qi Zhou Misrepresentation in English Contract Law from an Economic Perspective, SSRN Electronic Journal (Jan 2008).https://doi.org/10.2139/ssrn.1279024Qi Zhou A Deterrence Perspective on Damages for Fraudulent Misrepresentation, Journal of Interdisciplinary Economics 19, no.11 (Nov 2016): 83–96.https://doi.org/10.1177/02601079X07001900106Benjamin E. Hermalin, Avery W. Katz, Richard Craswell Chapter 1 Contract Law, (Jan 2007): 3–138.https://doi.org/10.1016/S1574-0730(07)01001-8Jean-Pierre Benoît, Lewis A. Kornhauser Chapter 60 Game-theoretic analysis of legal rules and institutions, (Jan 2002): 2229–2269.https://doi.org/10.1016/S1574-0005(02)03023-0Avery Wiener Katz Contract Formation and Interpretation, (Jan 2017): 425–432.https://doi.org/10.1007/978-1-349-74173-1_84Tian Zhu Holdups, simple contracts and information acquisition, Journal of Economic Behavior & Organization 42, no.44 (Aug 2000): 549–560.https://doi.org/10.1016/S0167-2681(00)00103-7Claudio Mezzetti, Theofanis Tsoulouhas Gathering information before signing a contract with a privately informed principal, International Journal of Industrial Organization 18, no.44 (May 2000): 667–689.https://doi.org/10.1016/S0167-7187(98)00040-XLucian Arye Bebchuk, I.P.L. Png Damage measures for inadvertant breach of contract, International Review of Law and Economics 19, no.33 (Sep 1999): 319–331.https://doi.org/10.1016/S0144-8188(99)00016-2Jacques Crémer, Fahad Khalil, Jean-Charles Rochet Contracts and Productive Information Gathering, Games and Economic Behavior 25, no.22 (Nov 1998): 174–193.https://doi.org/10.1006/game.1998.0651Jacques Crémer, Fahad Khalil, Jean-Charles Rochet Strategic Information Gathering before a Contract Is Offered, Journal of Economic Theory 81, no.11 (Jul 1998): 163–200.https://doi.org/10.1006/jeth.1998.2415 Tracy R. Lewis and David E. M. Sappington Information Management in Incentive Problems Lewis & Sappington, Journal of Political Economy 105, no.44 (Jul 2015): 796–821.https://doi.org/10.1086/262094Avery Wiener Katz Contract Formation and Interpretation, SSRN Electronic Journal (Jan 1997).https://doi.org/10.2139/ssrn.69534Anthony M. Marino Regulation of product safety design through product testing, Journal of Regulatory Economics 7, no.33 (May 1995): 255–276.https://doi.org/10.1007/BF01067097JAN BRÖCHNER Precontractual investigation and risk aversion, Engineering, Construction and Architectural Management 1, no.22 (Feb 1994): 91–101.https://doi.org/10.1108/eb020994 Eric Rasmusen , and Ian Ayres Mutual and Unilateral Mistake in Contract Law, The Journal of Legal Studies 22, no.22 (Oct 2015): 309–343.https://doi.org/10.1086/468167Tim S. Campbell, Yuk-Shee Chan, Anthony M. Marino Welfare and product testing by a regulated monopolist, Journal of Regulatory Economics 3, no.11 (Mar 1991): 57–68.https://doi.org/10.1007/BF00157611 Richard Craswell Performance, Reliance, and One-Sided Information, The Journal of Legal Studies 18, no.22 (Oct 2015): 365–401.https://doi.org/10.1086/468151Eric A. Posner, Omri Ben-Shahar, Ariel Porat Fault in Contract Law, (): 69–81.https://doi.org/10.1017/CBO9780511780097.006Barry E. Adler, Omri Ben-Shahar, Ariel Porat Contract Law and the Willfulness Diversion, (): 190–204.https://doi.org/10.1017/CBO9780511780097.014

Impossibility and Related Doctrines in Contract Law: An Economic Analysis

… The typical case in which impossibility or some related doctrine is invoked is one where, by reason of an unforeseen or at least unprovided-for event, performance by one of the parties of his obligations under the contract has become so much more costly than he foresaw at the time the contract was made as to be uneconomical (that is, the costs of performance would be greater than the benefits). The performance promised may have been delivery of a particular cargo by a specified delivery date – but the ship is trapped in the Suez Canal because of a war between Israel and Egypt. Or it may have been a piano recital by Gina Bachauer – and she dies between the signing of the contract and the date of the recital. The law could in each case treat the failure to perform as a breach of contract, thereby in effect assigning to the promisor the risk that war, or death, would prevent performance (or render it uneconomical). Alternatively, invoking impossibility or some related notion, the law could treat the failure to perform as excusable and discharge the contract, thereby in effect assigning the risk to the promisee. From the standpoint of economics – and disregarding, but only momentarily, administrative costs – discharge should be allowed where the promisee is the superior risk bearer; if the promisor is the superior risk bearer, nonperformance should be treated as a breach of contract. “Superior risk bearer” is to be understood here as the party that is the more efficient bearer of the particular risk in question, in the particular circumstances of the transaction.

A Theory of Strict Liability

A Theory of Strict Liability