EMLE common mistakes
EMLE · Understand the traps and how to avoid them.
In Coasean bargaining questions, asserting that the efficient outcome is reached regardless of the initial allocation of legal entitlements, without checking the stated assumptions (zero transaction costs, full information, no wealth effects, enforceable agreements).
Candidates memorize the Coase theorem's headline and treat it as an unconditional result, so they skip the assumption check the question is actually testing.
What to do instead
Before answering, write the four conditions on scratch paper and test each against the facts. If any is violated, the answer must be that the initial allocation matters for efficiency, not merely for distribution.
Treating 'efficiency' as a single concept, so a Pareto improvement is offered where the question asks for Kaldor-Hicks, or vice versa, and redistribution questions are answered with efficiency language.
The terms are learned as synonyms in ordinary speech, and exam questions deliberately exploit the gap between 'someone better off, nobody worse off' and 'gains could in principle compensate losses'.
What to do instead
Maintain a three-line glossary: Pareto (no one worse off), Kaldor-Hicks (potential compensation, compensation not actually paid), and allocative efficiency (marginal benefit equals marginal cost). Classify every option against the exact term used in the stem.
In externality problems, recommending a Pigouvian tax set at the total external damage rather than at the marginal external damage at the efficient quantity, or recommending a ban where the efficient outcome involves positive output.
Candidates conflate total and marginal magnitudes, and moral framing ('pollution is bad') pushes toward prohibition rather than internalization.
What to do instead
Always draw marginal social cost, marginal private cost, and marginal benefit; identify the intersection that defines the efficient quantity; then read the tax off the vertical gap between the two cost curves at that quantity.
Assuming that civil law systems do not use precedent and that common law systems have no codes, and building comparative-law arguments on that binary.
Textbook simplifications are memorable, and the nuance (persuasive jurisprudence constante, codified statutes in common law jurisdictions, constitutional and civil codes) is easy to forget under time pressure.
What to do instead
Replace the binary with a spectrum: describe the formal status of precedent versus its practical weight, and cite the function of codification rather than its presence. In comparative questions, argue from institutional function, not from labels.
In consumer theory, substituting the slope of the indifference curve for the marginal rate of substitution at the wrong point, or confusing income and substitution effects when the question asks about a price change for a Giffen or inferior good.
The algebra is mechanical, and candidates apply formulas without tracking which variable changed and whether utility is held constant (Hicks) or purchasing power is held constant (Slutsky).
What to do instead
State the decomposition explicitly before computing: for a price fall, the substitution effect is always positive for the good whose price fell; the income effect's sign depends on normality. Then check the total against the known Giffen condition.
In producer and market-structure questions, equating profit maximization with price equals marginal cost in all market structures, or applying the zero-profit long-run condition to monopolistic competition without noting product differentiation and excess capacity.
The competitive benchmark is over-learned and gets applied reflexively to monopoly, oligopoly, and monopolistic competition.
What to do instead
First name the market structure and its profit-maximization rule: MR equals MC for all, with P equals MC only under perfect competition. Then state the long-run entry condition separately for each structure.
In game-theory items, identifying a Nash equilibrium with a Pareto-optimal outcome, or failing to distinguish a dominant strategy from an equilibrium strategy in a prisoner's dilemma or coordination game.
Prisoner's dilemma examples dominate teaching, so candidates generalize 'equilibrium is bad' and stop checking whether a unilateral deviation actually pays.
What to do instead
For each strategy profile, test deviations one player at a time and write the payoffs. Only then compare equilibria on the Pareto criterion. For dominance, check whether one strategy beats the other for every opponent action, not just the equilibrium path.
In contract and tort economic analysis, invoking deterrence alone and ignoring the interaction between liability rules and precaution incentives, activity levels, and insurance or judgment-proofness, so a rule is judged efficient on one dimension only.
The Hand formula and cheapest-cost-avoider idea are taught as single-variable tests, and candidates stop at the first efficient-sounding answer.
What to do instead
For any liability rule, run a checklist: does it incentivize optimal precaution by both parties, does it affect activity levels, and does it remain effective when one party cannot pay? Answer only after all three are addressed.
In competition-law questions, concluding that a practice is unlawful because it reduces competition, without defining the relevant market, establishing market power, and specifying the theory of harm and any efficiencies.
Candidates reason from the label of the practice (resale price maintenance, tying, exclusivity) rather than from the analytical framework, which in modern enforcement is effects-based.
What to do instead
Use a fixed sequence: relevant product and geographic market, market power, theory of harm (price, output, quality, innovation), countervailing efficiencies, and remedy. State which step the facts actually establish.
In quantitative items, computing a statistic correctly but misreading the graph or table axis, confusing a percentage change with a percentage-point change, or reporting a correlation as evidence of causation without addressing confounders and selection.
Time pressure favors jumping to computation, and base-rate and percentage-point errors are systematically overlooked in verbal reasoning.
What to do instead
Before computing, label units and the base for every percentage. After computing, write one sentence on what the number does and does not establish, explicitly naming the identification problem when causal language appears in the stem.
In argumentative writing, producing a structured essay that summarizes both sides without committing to a thesis, or asserting a conclusion without engaging the strongest counterargument.
Candidates import a school debate format and believe balance equals rigor, whereas the marking rewards a defended position with reasoned rebuttal.
What to do instead
State the thesis in the first paragraph, allocate one paragraph to the strongest objection with a direct rebuttal, and close by restating the thesis with the conditions under which it holds. Use explicit signposting ('because', 'therefore', 'however') rather than narrative flow.