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Common law efficiency when joinder and class actions fail as aggregation devices

Author

Listed:
  • Frank Fagan

    (EDHEC Business School)

  • Urmee Khan

    (University of California)

Abstract

We develop a litigant-based model of rule selection where parties choose to litigate rules that are efficient between two parties, but inefficient as between a potential class or potentially joined litigants and a counter-party. Collective action problems lead to incomplete party formation, which generates continuous litigation of seemingly efficient rules. By accounting for externalities borne by non-parties, we show that rules which are allocatively efficient across both parties and non-parties are evolutionary stable for any given judicial ideology or judicial preference for prestige, thus preserving the explanatory power of the Efficiency of Common Law Hypothesis.

Suggested Citation

  • Frank Fagan & Urmee Khan, 2019. "Common law efficiency when joinder and class actions fail as aggregation devices," European Journal of Law and Economics, Springer, vol. 47(1), pages 1-14, February.
    • Handle: RePEc:kap:ejlwec:v:47:y:2019:i:1:d:10.1007_s10657-018-9604-9
    DOI: 10.1007/s10657-018-9604-9
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    References listed on IDEAS

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