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Does the English Rule Discourage Low-Probability-of-Prevailing Plaintiffs?

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  • Polinsky, A Mitchell
  • Rubinfeld, Daniel L

Abstract

One of the principal results in the economic theory of litigation is that the English rule of fee allocation (in which the loser pays the winner's litigation costs) is better at discouraging suits by low-probability-of-prevailing plaintiffs than the American rule (in which each side bears its own costs). This result has been demonstrated under the assumption that all suits that are filed go to trial. Using a standard asymmetric-information model of litigation, we show that when the settlement process is taken into account the English rule results in more low-probability-of-prevailing plaintiffs going to trial than the American rule. In this sense, the English rule encourages low-probability plaintiffs more than the American rule. Copyright 1998 by the University of Chicago.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Legal Studies.

Volume (Year): 27 (1998)
Issue (Month): 1 (January)
Pages: 141-57

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Handle: RePEc:ucp:jlstud:v:27:y:1998:i:1:p:141-57

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Web page: http://www.journals.uchicago.edu/JLS/

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Cited by:
  1. Echazu, Luciana & Garoupa, Nuno, 2012. "Why not adopt a loser-pays-all rule in criminal litigation?," International Review of Law and Economics, Elsevier, vol. 32(2), pages 233-241.
  2. Michael R. Baye & Dan Kovenock & Casper G. de Vries, 2000. "Comparative Analysis of Litigation Systems: An Auction-Theoretic Approach," Tinbergen Institute Discussion Papers 00-103/2, Tinbergen Institute.
  3. Garoupa, Nuno, 1999. "The economics of political dishonesty and defamation," International Review of Law and Economics, Elsevier, vol. 19(2), pages 167-180, June.
  4. Ottoz Elisabetta & Cugno Franco, 2012. "Different Rules of Legal-Cost Allocation and Patent Hold-Up," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201216, University of Turin.
  5. Alex Esteller-More, . "Optimal user charges on judicial ligitation. An analysis for the Spanish case," Studies on the Spanish Economy 67, FEDEA.
  6. Christian Schwab & Hin-Yue Tang & Stefan Winter, 2014. "Free choice of legal fee shifting rules?," European Journal of Law and Economics, Springer, vol. 37(2), pages 299-324, April.

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