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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.

Suggested Citation

  • A. Mitchell Polinsky, 1980. "Resolving Nuisance Disputes: The Simple Economics of Injunctive and Damage Remedies," NBER Working Papers 0463, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0463
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    Cited by:

    1. Leslie Rosenthal, 2007. "Economic Efficiency, Nuisance, and Sewage: New Lessons from Attorney-General v. Council of the Borough of Birmingham, 1858–95," The Journal of Legal Studies, University of Chicago Press, vol. 36(1), pages 27-62, January.
    2. Peter S. Menell, 1991. "The Limitations of Legal Institutions for Addressing Environmental Risks," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 93-113, Summer.
    3. Jacobi, Osnat & Weiss, Avi, 2013. "Allocation of fault in contract law," International Review of Law and Economics, Elsevier, vol. 36(C), pages 1-11.
    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.
    5. Michael Minnis & Nemit Shroff, 2017. "Why regulate private firm disclosure and auditing?," Accounting and Business Research, Taylor & Francis Journals, vol. 47(5), pages 473-502, July.
    6. Hylton Keith N, 2006. "Property Rules and Liability Rules, Once Again," Review of Law & Economics, De Gruyter, vol. 2(2), pages 137-191, September.
    7. Steven Shavell, 2005. "Liability for Accidents," NBER Working Papers 11781, National Bureau of Economic Research, Inc.
    8. Riza Limor, 2019. "Rawls, Taxation and Calabresi & Melamed’s Rules," Review of Law & Economics, De Gruyter, vol. 15(3), pages 1-26, November.
    9. Tadiboyina Venkateswarlu, 1997. "Law and Economics Course Readings: A Survey of North American Universities," The American Economist, Sage Publications, vol. 41(1), pages 89-93, March.
    10. Horwitz Steven & Bodenhorn Howard, 1994. "A Property Rights Approach to Free Banking," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 5(4), pages 1-16, December.
    11. Henry Van Egteren & Jianmin Tang, 1997. "Maxium Victim Benefit: A Fair Division Process in Transboundary Pollution Problems," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 10(4), pages 363-386, December.
    12. Ayal Adi & Rotem Yaad, 2014. "Incorporation Rules," Review of Law & Economics, De Gruyter, vol. 10(1), pages 1-30, March.

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