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Punitive damages and the recklessness requirement with uninformed injurers

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  • Bhole, Bharat
  • Wagner, Jeffrey

Abstract

Juries/courts sometimes award large punitive damages when the probability of detecting harm is high and take the recklessness of actions into account. However, economic theory suggests punitive damages should generally be low in such contexts. We argue that juries may be acting wisely. In particular, we show that: (a) even if the probability of conviction is one, punitive damages can raise welfare by aligning an injurer's perceived and actual benefit of care; and (b) a recklessness requirement for awarding punitive damages can be welfare-enhancing when there is uncertainty about the court's view of appropriate care.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Law and Economics.

Volume (Year): 30 (2010)
Issue (Month): 3 (September)
Pages: 253-264

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Handle: RePEc:eee:irlaec:v:30:y:2010:i:3:p:253-264

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Web page: http://www.elsevier.com/locate/irle

Related research

Keywords: Biased beliefs Negligence Outrageousness Punitive damages Recklessness Reprehensibility Strict liability;

References

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  1. Schmitz, Patrick W., 2000. "On the Joint Use of Liability and Safety Regulation," MPRA Paper 12536, University Library of Munich, Germany.
  2. Rabah Amir, 2005. "Supermodularity and Complementarity in Economics: An Elementary Survey," Southern Economic Journal, Southern Economic Association, vol. 71(3), pages 636-660, January.
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  4. Bebchuk, Lucian Arye & Kaplow, Louis, 1992. "Optimal Sanctions When Individuals Are Imperfectly Informed about the Probability of Apprehension," The Journal of Legal Studies, University of Chicago Press, vol. 21(2), pages 365-70, June.
  5. Viscusi, W Kip, 2001. "The Challenge of Punitive Damages Mathematics," The Journal of Legal Studies, University of Chicago Press, vol. 30(2), pages 313-50, Part I Ju.
  6. Chu, C.Y. Cyrus & Huang, Chen-Ying, 2004. "On the definition and efficiency of punitive damages," International Review of Law and Economics, Elsevier, vol. 24(2), pages 241-254, June.
  7. Mark Bagnoli & Ted Bergstrom, 2005. "Log-concave probability and its applications," Economic Theory, Springer, vol. 26(2), pages 445-469, 08.
  8. Sunstein, Cass R & Schkade, David A & Kahneman, Daniel, 2000. "Do People Want Optimal Deterrence?," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 237-53, January.
  9. Craswell, Richard & Calfee, John E, 1986. "Deterrence and Uncertain Legal Standards," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 279-303, Fall.
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