A Damage-Revelation Rationale for Coupon Remedies
AbstractThis article studies optimal remedies in a setting in which damages vary among plaintiffs and are difficult to determine. We show that giving plaintiffs a choice between coupons to purchase units of the defendant's product at a discount and cash - a coupon-cash remedy - is superior to cash alone. The optimal coupon-cash remedy offers a cash amount that is less than the value of the coupons to plaintiffs who suffer relatively high harm. Such a remedy induces these plaintiffs to choose coupons, and plaintiffs who suffer relatively low harm to choose cash. Sorting plaintiffs in this way leads to better deterrence because the costs borne by defendants (the cash payments and the cost of providing coupons) more closely approximate the harms that they have caused.
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Bibliographic InfoPaper provided by Berkeley Olin Program in Law & Economics in its series Berkeley Olin Program in Law & Economics, Working Paper Series with number qt05s924dk.
Date of creation: 01 Oct 2007
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- Severin Borenstein, 1995.
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NBER Working Papers
5085, National Bureau of Economic Research, Inc.
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- Spier, Kathryn E, 1994. "Settlement Bargaining and the Design of Damage Awards," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(1), pages 84-95, April.
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- Louis Kaplow & Steven Shavell, 1993.
"Accuracy in the Assessment of Damages,"
NBER Working Papers
4287, National Bureau of Economic Research, Inc.
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