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Resolving Nuisance Disputes: The Simple Economics of Injunctive and Damage Remedies

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  • A. Mitchell Polinsky

Abstract

In nuisance-type cases, legal commentators generally recommend -- and the courts seem to increasingly use -- the award of damages rather than the granting of an injunction of the harmed party. This essay compares the economic consequences of injunctive and damage remedies under a variety of circumstances. The discussion focuses on the ability of the remedies to deal with the strategic behavior of the litigants, the cost of redistributing income among the litigants (or classes of litigants), and the im-perfect information of the courts. In ideal circumstances -- cooperative behavior, costless redistribution, and perfect information -- injunctive and damage remedies are equivalent. The presence of strategic behavior alone does not change this conclusion. However, if it is also costly to redistribute income, the remedies are no longer equivalent. When there are a small number of litigants in these circumstances, neither remedy is generally more effective. When there are a large number of litigants, the damage remedy is superior. Finally, and most realistically, if the courts also have imperfect information, neither remedy dominates the other. Thus, the general presumption in favor of damage remedies is not supported.

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File URL: http://www.nber.org/papers/w0463.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0463.

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Date of creation: Mar 1980
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Publication status: published as Polinsky, A. Mitchell. "Resolving Nuisance Disputes: The Simple Economics of Injunctive and Damage Remedies." Stanford Law Review, Vol. 32, No. 6, (July 1980), pp. 1075-1112.
Handle: RePEc:nbr:nberwo:0463

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Cited by:
  1. Steven Shavell, 2005. "Liability for Accidents," NBER Working Papers 11781, National Bureau of Economic Research, Inc.
  2. Jacobi, Osnat & Weiss, Avi, 2013. "Allocation of fault in contract law," International Review of Law and Economics, Elsevier, vol. 36(C), pages 1-11.
  3. Henry Van Egteren & Jianmin Tang, 1997. "Maxium Victim Benefit: A Fair Division Process in Transboundary Pollution Problems," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 10(4), pages 363-386, December.
  4. Jacobi, Osnat & Weiss, Avi, 2013. "The effect of time on default remedies for breach of contract," International Review of Law and Economics, Elsevier, vol. 35(C), pages 13-25.

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