| Deals: The Economic Structure of Transactions and Contracting L6107, Spring 2009 Professors Avery W. Katz and Ronald Mann |
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Instructors:
Professor Avery Katz
JGH 911
212-854-0066
ak472@columbia.eduProfessor Ronald Mann
JGH 837
212- 854-1570
rmann@law.columbia.edu
Office hours: Tuesdays, 4-5:30pm
Office hours: Tuesdays, 1-2 pm
Faculty assistant: Amara Levy-Moore,
854-0064, alevym@law.columbia.edu.
Teaching assistant: Nicholas Harley, nicholas.harley@law.columbia.edu
Course description: This course will focus on the role of professionals in creating value through transaction engineering. The first eight weeks of the course, up until spring break, will be devoted to barriers to transacting -- including information problems, transaction costs, enforceability, strategic behavior, contracting over time -- and a range of responses, such as option theory, decision theory, risk management, reputation markets, incentive alignment, and techniques for eliminating information asymmetries. After spring break, students working in teams will apply the tools developed in the first half to a series of real transactions. This portion of the course will be described more fully in a later memorandum. The goal of the course is to explain both how private parties actually order their commercial interactions and to develop a systematic theory of how they ought to do so.
Class meets: Tuesdays and Thursday from 10:40 am – noon, 105 Jerome Greene Hall. Please check the official CLS curriculum guide for the most up-to-date room information.
Readings: There is one required text and a series of assigned readings. The text, Louis Kaplow and Steven Shavell, Contracting (West Publishing, 2004), is available for purchase at Book Culture or the Columbia University bookstore. The readings will be made available on a weekly basis on the online CLS courseweb (you will need your network ID and password to access it from the law school server). Many of the readings are also available online in more complete form at JSTOR or Hein Online, which you can access using a university connection using the links below.
Online resources: A copy of this syllabus, as well as copies of reading assignments, handouts and other class-related materials as they become available, can be found on the official course page at www.columbia.edu/~ak472/deals.
Format and requirements: The class format will combine lecture and discussion. Students are expected to attend all class meetings, to prepare for and participate in class discussion on a regular basis, and to complete a series of short written assignments that are designed to provide you with practice working with the main concepts of the course.In addition, students will be divided into four work groups, each of which will be responsible for writing a group memo and leading the class discussion on one of the transactions we take up in the last five weeks of the class. Further administrative details regarding these work groups will be provided in the first week of the term.
Grading: Grades will be based on the individual homework assignments (10%), the group memo (50%, of which 10% is based on peer-assigned grades), and an 8-hour take–home final exam (40%). In addition, students who make significant positive contributions to class discussion over the course of the semester will have their grades raised (e.g., from B+ to A-); while those whose participation or attendance has been delinquent will have their grades lowered.The 8-hour take home exam is scheduled for Tuesday, May 12; you may write the exam at home, at the library, or in a classroom provided by the law school. For further details on exam logistics, see the official CLS Spring 2009 exam schedule.
Reading assignments: The following is a schedule of reading assignments for the first three weeks of the course, together with a list of topics for the remainder of the term. The readings themselves will be posted on the online CLS courseweb, or alternatively can be purchased in hard copy at University Printing Services, Room 401 International Affairs.Weekly updates will be posted via the class e-mail list; and specific assignments for each class will be announced in the preceding class.
Steven Salop, The Farmer and the Landlord
Steven N. S. Cheung, Transaction Costs, Risk Aversion, and the Choice of Contractual Arrangements, Journal of Law and Economics, Vol. 12, No. 1 (Apr., 1969), pp. 23-42.
Adolph Berle and Gardner Means, The Modern Corporation and Private Property, pp. 119-125 (1932).
Ronald J. Gilson, Engineering a Venture Capital Market: Lessons from the American Experience. Stanford Law Review, Vol. 55, No. 4, (April 2003), pp. 1067-92 [selections].
United States of America v. Visa U.S.A. Inc., Visa International Corp., and Mastercard International Incorporated (Direct Expert Testimony of Ronald J. Gilson)
Continue with prior material.
Ronald Coase, The Problem of Social Cost, Journal of Law and Economics, Vol. 3, (Oct., 1960), pp. 1-44 [selections].
Robert Cooter, The Cost of Coase, Journal of Legal Studies, Vol. 11, No. 1 (Jan., 1982), pp. 1-33 [selections]
Avinash Dixit & Barry Nalebuff, Thinking Strategically, pp. 89-115
Michael A. Heller and Rebecca S. Eisenberg, Can Patents Deter Innovation? The Anticommons in Biomedical Research, Science, New Series, Vol. 280, No. 5364 (May 1, 1998), pp. 698-701.
Kaplow & Shavell, Appendix 2 [Shopping Center Lease]
Kaplow & Shavell, pp. 56-61, Appendix 7 [Insurance Contract]
Mark Pauly, The Economics of Moral Hazard: Comment, American Economic Review, Vol. 58, No. 3, part 1 (June, 1968), pp. 531-537.
Benjamin Klein, Contracting Costs and Residual Claims: The Separation of Ownership and Control, Journal of Law and Economics, Vol. 26, No. 2, pp. 367-374.
Joseph E. Stiglitz, The Contributions of the Economics of Information to Twentieth Century Economics, Quarterly Journal of Economics, Vol. 115, No. 4 (Nov., 2000), pp. 1441-1478 [selections]
A. Mitchell Polinsky and Daniel L. Rubinfeld , Aligning the Interests of Lawyers and Clients, American Law and Economics Review, Vol. 5, No. 1 (2003), pp. 165-188 [pp. 165-69, 183-87 only].
Kaplow & Shavell, pp. 61-65.
George Akerlof, The Market for Lemons: Quality Uncertainty and the Market Mechanism, The Quarterly Journal of Economics, Vol. 84, No. 3 (Aug., 1970), pp. 488-50.
Victor P. Goldberg, The Gold Ring Problem, The University of Toronto Law Journal, Vol. 47, No. 4 (Autumn, 1997), pp. 469-494 [excerpts].
Earnest Money Agreement. Handed out in class; also available on the courseweb.
Optional: Richard Thaler, Anomalies: The Winner's Curse, Journal of Economic Perspectives, Vol. 2, No. 1 (Winter, 1988), pp. 191-202.
Oliver E. Williamson, Credible Commitments: Using Hostages to Support Exchange, American Economic Review, Vol. 73, No. 4 (Sep., 1983), pp. 519-540 [omitting section II].
Victor P. Goldberg, “A Relational Exchange Perspective on the Employment Relationship,” in Frank H. Stephen (ed.) Firms, Organization and Labour: Approaches to the Economics of Work Organization, Macmillan Press (1984), pp. 127-145 [selections].
Patrick J. Kaufmann and Francine Lafontaine, Costs of Control: The Source of Economic Rents for McDonald's Franchisees , Journal of Law and Economics, Vol. 37, No. 2 (Oct., 1994), pp. 417-453 [selections]
Paul Milgrom & John Roberts, Economics, Organization, and Management , pp. 259-269
Arthur Alan Leff, Injury, Ignorance and Spite: The Dynamics of Coercive Collection, Yale Law Journal, Vol. 80, No. 1, (Nov., 1970), pp. 5-7, 24-26.
Kaplow & Shavell, pp. 40-47
Paul Milgrom & John Roberts, Economics, Organization, and Management, pp. 240-241.
Stanford Law School Case Series, Hotel Management Agreement Problem.
Continue with prior material.
Kaplow & Shavell, pp. 53-54, 65-68
Robert H. Mnookin, Scott R. Peppet, and Andrew S. Tulumello, Beyond Winning : Negotiating To Create Value In Deals And Disputes (2000), pp. 93-96, 127-155.
Ronald J. Gilson, Charles F. Sabel and Robert E. Scott, Contracting for Innovation: Vertical Disintegration and Interfirm Collaboration, 109 Columbia Law Review (forthcoming, April 2009)
Ronald J. Gilson and Bernard S. Black, (Some of) The Essentials of Finance and Investment (1993), pp. 231-253.
Avery W. Katz, The Option Element in Contracting, Virginia Law Review , 90(8), December 2004, pp. 2187-2244 [selections].
Steven L. Schwarcz, The Alchemy of Asset Securitization , Stanford Journal of Law, Business & Finance, Vol. 1, No. 1 (Fall 1994), pp. 133-154.
Claire A. Hill, Securitization: A Low-Cost Sweetener for Lemons , Washington University Law Quarterly , Vol. 74, No. 4 (Winter 1996), pp. 1061-1126 [selections]Avery W. Katz, An Economic Analysis of the Guaranty Contract, University of Chicago Law Review, 6(1), Winter 1999, pp. 47–116 [selections].
Peter J. Wallison & Bert Ely, Nationalizing Mortgage Risk: The Growth of Fannie Mae and Freddie Mac, AEI Press (2000), chapters 2, 6 & 7 only.
Susan Woodward and Robert Hall, What to Do About Fannie Mae and Freddie Mac?
Big U.S. Role in Lending to Students, New York Times, February 26, 2009.
Ronald Mann, Verification Institutions in Financing Transactions , Georgetown Law Journal , 87(7), July 1999, pp. 2225-2272 [selections].
Victor P. Goldberg, Framing Contract Law: An Economic Perspective (2007), pp. 313-324.
Robert H. Mnookin, Scott R. Peppet, and Andrew S. Tulumello, Beyond Winning : Negotiating To Create Value In Deals And Disputes (2000), pp. 274-294.
Kaplow & Shavell, pp. 47-52, Appendix 6 [AAA Commercial Arbitration Rules]
Robert E. Scott and George G. Triantis, Anticipating Litigation in Contract Design, Yale Law Journal, 115(3), January 2006, pp. 814-879 [selections].
Spring break -- no classes meet
Materials to be provided by student panelists. Materials to be provided by student panelists. Note that class will not meet on April 2 due to scheduling conflicts for the visting transactional attorneys. Instead, we will hold a makeup class from 9:10-10:30am on Wednesday, April 22. Materials to be provided by student panelists. Materials to be provided by student panelists. Materials to be provided by student panelists.