TY  - JOUR
AU  - Bar-Gill,Oren
AU  - Barzuza,Michal
AU  - Bebchuk,Lucian
TI  - The Market for Corporate Law
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9156
PY  - 2002
Y2  - September 2002
UR  - http://www.nber.org/papers/w9156
L1  - http://www.nber.org/papers/w9156.pdf
N1  - Author contact info:
Oren Bar-Gill
New York University School of Law
40 Washington Square South, 411B
New York, NY 10012
Tel: (212) 998-6222
Fax: (212) 995-4590
E-Mail: bargill@nyu.edu

Lucian A. Bebchuk
Harvard Law School
1545 Massachusetts Avenue
Cambridge, MA 02138
Tel: 617/495-3138
Fax: 617/812-0554
E-Mail: bebchuk@law.harvard.edu
AB  - This paper develops a model of the competition among states in providing corporate law rules. The analysis provides a full characterization of the equilibrium in this market. Competition among states is shown to produce optimal rules with respect to issues that do not have a substantial effect on managers' private benefits but not with respect to issues (such as takeover regulation) that substantially affect these private benefits. We analyze why a Dominant state such as Delaware can emerge, the prices that the dominant state will set and the profits it will make. We also analyze the roles played by legal infrastructure, network externalities, and the rules governing incorporations. The results of the model are consistent with, and can explain, existing empirical evidence; they also indicate that the performance of state competition cannot be evaluated on the basis of how incorporation in Delaware in the prevailing market equilibrium affects shareholder wealth.
ER  -