The economics of land transfer and title insurance

In the presence of uncertainty over the title of land (due to fraud or error), a legal system can protect either the current (innocent) owner, or a previous owner who claims title. The predominant system in the United States generally awards title to the latter in the event of legitimate claim. Thus, current owners frequently purchase title insurance to provide indemnification in the event of a loss. In contrast, the Torrens system awards title to the current owner, but provides for indemnification of any legitimate claimants. We evaluate these two systems and argue that if transaction costs are low, both promote efficient assignment of title (according to the Coase Theorem), but if transaction costs are high, the Torrens system is more likely to award title to the party that values it the most (namely, the current possessor).     

Optimal fiscal zoning when the local government is a discriminating monopolist

Monopoly zoning by local governments has been studied extensively since the original article by White [1975, in: E. Mills and W. Oates, eds., Fiscal zoning and land use controls (Lexington Books, Lexington, MA)]. However, little or no attention has been paid to the possibility of monopolistic discrimination under such a regime. The question is: When will zoning multiple lot sizes be feasible given that buyers with different valuations of land cannot be coerced into purchasing particular lots? The literature on imperfect price discrimination by monopolists is brought to bear on this question. It is shown that the resulting zoning strategy may or may not involve multiple lot sizes. The factors determining the optimal strategy are studied in detail, with particular emphasis on the nature of the market for undeveloped land in the community.     

The real puzzle of blackmail: An informational approach

The “puzzle” of blackmail is that threats to reveal private information that would be harmful to someone in exchange for money are illegal, but revelation is not. The resolution is that concealment of information about product quality impedes the efficient operation of markets, whereas revelation promotes it. The real puzzle is why possessors are not naturally inclined to sell to uninformed parties, who value the information more than would-be blackmail victims. The answer has to do with the public good qualities of information, which create an appropriability problem in transactions with uninformed parties. The paper also discusses incentives to acquire compromising information.     

Reverse Mortgages and Borrower Maintenance Risk

This paper develops a theoretical model of the problem of maintenance risk in reverse mortgages (RMs) and home equity conversion instruments generally. By maintenance risk, we refer to the incentive homeowners will have to reduce maintenance expenditures as their equity in the house falls during the term of the RM. The underlying reason for this tendency is the limited liability feature of RMs, given that a borrower's obligation to the lender at. maturity is limited to the value of the house.
The results of the model show that lenders will respond to this problem either by limiting the amount of RM loans to guarantee that maintenance risk is not a threat, or by charging an interest rate premium to cover the expected cost of default. Unfortunately, there do not exist data to test the importance of maintenance risk as a possible limitation on the extent of the RM market.     

An Experimental Analysis of the Impact of Intermediaries on the Outcome of Bargaining Games

We conduct an experimental analysis of the bargaining between a buyer and a seller of the exchange of a single good by means of an intermediary or broker. We examine how an intermediary affects the price, the likelihood of a successful negotiation, and the time it takes to complete a negotiation. We first examine the impact of the intermediary as a pure middleman, and then as an information source about the distribution of seller and buyer reservation prices. The results show that an intermediary, whether or not informed, increases the sale price, reduces the likelihood of an agreement, and increases the time to reach an agreement (though the number of bargaining rounds declines). The results suggest that the benefits of brokerage may be predominantly in the matching of buyers and sellers rather than in facilitating bargaining.     

The Multiple Listing Service, Commission Splits, and Broker Effort

This paper examines the impact of split commissions on broker effort in MLS sales. The joint effort of brokers to find a buyer for a given listing is maximized when the broker who locates a buyer first receives the entire commission. In contrast, splitting the commission between the listing and finding broker (when they differ) maximizes the joint profits of brokers. When competition among brokers to acquire listings is considered, however, the split brokers most prefer entails a smaller (though still positive) share for the listing broker in order to reduce wasteful competition for listings. While sellers still prefer to pay only the broker who finds a buyer, brokers may not be willing to acquire and share listings under such an arrangement.     

Organizational dissidence: The case of whistle-blowing

Research on whistle-blowing has been hampered by a lack of a sound theoretical base. In this paper, we draw upon existing theories of motivation and power relationships to propose a model of the whistle-blowing process. This model focuses on decisions made by organization members who believe they have evidence of organizational wrongdoing, and the reactions of organization authorities. Based on a review of the sparse empirical literature, we suggest variables that may affect both the members' decisions and the organization's responses.     

Deviant managerial behavior: Costs,outcomes and prevention

This paper examines deviant managerial behavior, and compares such behavior to the clinical psychological sociopathic model. The scope of a multinational corporate operation can enhance or degrade the quality of life for individuals with more impact than at any previous time in history. Social costs are compared to the results of sociopathic behavior and examined as the result of amoral or immoral behavior. The idea of the sociopathic manager is discussed, and theoretical causes of sociopathic development are examined with bases in behavioral, economic and criminological literature. Future research and recommendations for prevention of sociopathic behavior are advanced.N. S. Miceli is a doctoral student at the University of Oklahoma majoring in Management (Organizational Behavior and Human Resource Management). His research interests include the effects of ASPD on decision making, attitudes toward disabled persons, occupational health and stress, international business, cross-cultural issues and labor relations.An earlier version of this paper was presented at a Southwest Academy of Management Meeting.     

A Public Choice Analysis of the Evolution of Tort Law

Abstract . In contrast to the article by W. Harris, it is contended that in the area of product liability a rule of strict liability is not necessarily less efficient than a negligence rule and an analogy between product liability cases and lotteries is not appropriate.     

DO HMOS ENCOURAGE PREVENTION? AN ANALYSIS OF ALTERNATIVE HEALTH CARE PLANS

We examine consumers' choice of preventive care and providers' choice of capacity (which affects the transaction costs of consuming health care) under alternative health care financing plans. We show that consumers choose Pareto-optimal prevention and providers choose optimal capacity under a pure feE-for-service (FFS) plan and under a mixed plan that includes an up-front fee and a fee for service. Under a pure prepaid plan, however, consumers may over- or underconsume prevention. In the former case, capacity restrictions under such a plan (e.g., long office waits, limited options) may be interpreted as a second-best response to overconsumption. We also find that the dollar costs of health care are higher under the prepaid plan. These conclusions cast doubt on some of the presumed advantages of HMOs.