Economic analysis of law is applied to various models derived from a recent breach of contract by Hyundai Motor Company (Co.), which overstated the fuel economy of its Elantra model. The paper explores appropriate damages for breach of contract by Hyundai in hypothetical cases involving either intentional or unintentional breach. Depending on the specific scenario, losses may or may not be recoverable. A variety of ways are explored in which to calculate damages that serve to make customers whole.
IN THIS STUDY THE STRUCTURE-INDUCED EQUILIBRIUM APPROACH FOR MODELING DEMOCRATIC INSTITUTIONS IS EXTENDED TO ALLOW FOR THE ADDED STRUCTURAL FEATURES OF EXECUTIVE VETO AND LEGISLATIVE OVERRIDE. A MULTIDIMENSIONAL MODEL IS PRESENTED FOR A BUDGETARY PROCESS INVOLVING THREE ACTORS - A LEGISLATURE, AN APPROPRIATIONS COMMITTEE, AND AN EXECUTIVE. IN ORDER TO FOCUS ATTENTION ON THE ROLE OF THE VETO AND OVERRIDE POSSIBILITIES, SIMPLIFYING ASSUMPTIONS ARE MADE WITH REGARD TO OTHER ASPECTS OF THE AGENDA FORMATION PROCESS. IN PARTICULAR, THE COMMITTEE HAS MONOPOLY AGENDA POWER, A CLOSED AMENDMENT CONTROL RULE IS OPERATIVE, AND PERFECT-FORESIGHT EXPECTATIONS ARE HELD BY THE COMMITTEE AND THE EXECUTIVE. GIVEN THESE ASSUMPTIONS, UTILITY MAXIMIZATION BY THE SEVERAL ACTORS GENERATES A BUDGET OUTCOME CHARACTERIZED AS A STRUCTURE-INDUCED EQUILIBRIUM. THE GENERAL MODEL IS ILLUSTRATED GEOMETRICALLY WITH A TWO-DIMENSIONAL EXAMPLE, PERMITTING BUDGET OUTCOMES TO BE ANALYZED FOR VARIOUS COMBINATIONS OF VETO RULES AND OVERRIDE PROVISIONS. THE ANALYSIS DEMONSTRATES THAT BUDGET OUTCOMES ARE SENSITIVE TO ALTERNATIVE SPECIFICATIONS OF VETO RULES AND OVERRIDE PROVISIONS. IN THE ILLUSTRATION, EXECUTIVE VETO POWER IS SHOWN TO VARY DIRECTLY WITH BOTH THE PERMISSIVENESS OF THE VETO RULE AND THE STRINGENCY OF THE OVERRIDE PROVISION. SIMILAR RELATIONSHIPS, HOWEVER, ARE NOT FOUND TO EXIST FOR TOTAL BUDGET EXPENDITURES.
