What is law and why do people obey it? This question from jurisprudence has recently been tackled using the tools of economics. The field of law and economics has long studied how fines and imprisonment affect behavior. Nobody believes, however, that all compliance is motivated by penalties, and it is questionable whether that is even the typical motivation. Two books published in 2015, Frederick Schauer's The Force of Law and Richard McAdams's The Expressive Powers of Law: Theories and Limits, consider alternative motivations—Schauer skeptically and McAdams more sympathetically. While coercion, either directly or in support of internalized norms, seems to dominate law qua law (and not as a mere expression of morality), a considerable portion of law serves other uses such as coordination, information provision, expression, and reduction of transaction costs. (JEL C72, D23, D83, K00, K40, Z13)

[It is well known that risk increases the value of options. This article makes that precise in a new way. The conventional theorem says that the value of an option does not fall if the underlying asset becomes riskier in the conventional sense of the mean-preserving spread. This article uses two new definitions of "riskier" to show that the value of an option strictly increases (i) if the underlying asset becomes "pointwise riskier," and (ii) only if the underlying asset becomes "extremum riskier."]

It is well known that risk increases the value of options. This article makes that precise in a new way. The conventional theorem says that the value of an option does not fall if the underlying asset becomes riskier in the conventional sense of the mean-preserving spread. This article uses two new definitions of “riskier” to show that the value of an option strictly increases (i) if the underlying asset becomes “pointwise riskier,” and (ii) only if the underlying asset becomes “extremum riskier.”

Ordinarily, a monopoly cannot increase its profits by asking customers to sign agreements not to deal with potential competitors. If, however, there are 100 customers and the minimum efficient scale requires serving 15, the monopoly need only lock up 86 customers to forestall entry. If each customer believes that the others will sign, each also believes that no rival seller will enter. Hence, an individual customer loses nothing by signing the exclusionary agreement and will indeed sign. Thus, naked exclusion can be profitable.

Our one-page reply to Whinston and Siegal's forthcoming AER article correcting and elaborating our 1991 AER article.