Price Discrimination in the Market for Corporate Law

53 Pages Posted: 25 Sep 2000

See all articles by Marcel Kahan

Marcel Kahan

New York University School of Law; European Corporate Governance Institute

Ehud Kamar

Tel Aviv University - Buchmann Faculty of Law; European Corporate Governance Institute (ECGI)

Abstract

This Article analyzes how Delaware uses its market power in the market for incorporations to increase its profits through price discrimination. Price discrimination entails charging different prices to different consumers according to their willingness to pay. Two features of Delaware law constitute price discrimination. First, Delaware's uniquely structured franchise-tax schedule assesses a higher tax to public than to nonpublic firms. Second, Delaware's litigation-intensive corporate law effectively price discriminates among firms according to the level of their involvement in corporate disputes. From the perspective of social welfare, tax discrimination is likely to enhance efficiency. By contrast, price discrimination through litigation-intensive corporate law is likely to reduce efficiency.

JEL Classification: L10

Suggested Citation

Kahan, Marcel and Kamar, Ehud, Price Discrimination in the Market for Corporate Law. Available at SSRN: https://ssrn.com/abstract=217849 or http://dx.doi.org/10.2139/ssrn.217849

Marcel Kahan (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States
212-998-6268 (Phone)
212-995-4341 (Fax)

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Ehud Kamar

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv, 69978
Israel
972-3-6407301 (Phone)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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