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 cash and coupons to purchase units of the defendant's product at a discount -- 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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11227.
Date of creation: Mar 2005
Date of revision:
Publication status: published as Polinsky, A. Mitchell and Daniel L. Rubinfeld. "A Damage-Revelation Rationale for Coupon Remedies." Journal of Law, Economics, and Organization 3, 3 (October 2007): 653-61.
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Other versions of this item:
- D18 - Microeconomics - - Household Behavior - - - Consumer Protection
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- K19 - Law and Economics - - Basic Areas of Law - - - Other
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- A. Mitchell Polinsky & Daniel Rubinfeld, .
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American Law & Economics Association Annual Meetings
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- A. Mitchell Polinsky & Daniel L. Rubinfeld, 2003. "Remedies for Price Overcharges: The Deadweight Loss of Coupons and Discounts," NBER Working Papers 10162, National Bureau of Economic Research, Inc.
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- Borenstein, Severin, 1996.
"Settling for Coupons: Discount Contracts as Compensation and Punishment in Antitrust Lawsuits,"
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- Severin Borenstein, 1995. "Settling for Coupons: Discount Contracts as Compensation and Punishment in Antitrust Lawsuits," NBER Working Papers 5085, National Bureau of Economic Research, Inc.
- Louis Kaplow & Steven Shavell, 1996.
"Accuracy in the Assessment of Damages,"
NBER Working Papers
4287, National Bureau of Economic Research, Inc.
- Polinsky, A. Mitchell & Rubinfeld, Daniel L., 2003. "Remedies for Price Overcharges: The Deadweight Loss of Coupons and Discounts," Competition Policy Center, Working Paper Series qt92m0w4px, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Polinsky, A. Mitchell & Rubinfeld, Daniel L., 2003. "Remedies For Price Overcharges: The Deadweight Loss Of Coupons And Discounts," Berkeley Olin Program in Law & Economics, Working Paper Series qt1gs1g2g2, Berkeley Olin Program in Law & Economics.
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