Assessment of damages is a principle issue in litigation and, in light of this, we consider the social justification for, and the private benefits of, accurate measurement of harm. Greater accuracy induces parties to exercise levels of precaution that better reflect the magnitude of the harm they are likely to generate, and related, it stimulates uninformed parties to learn about risks before acting. However, accuracy in the assessment of harm cannot influence the behavior of parties -- and is therefore of no social value -- to the degree that parties lack knowledge of the harm they might cause when deciding on their precautions. In addition, regardless of the social value of accuracy, litigants generally gain by devoting resources toward proof of damages, leading often to socially excessive private incentives to establish damages.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
4287.
Length: Date of creation: Jul 1996 Date of revision: Handle: RePEc:nbr:nberwo:4287
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Find related papers by JEL classification: K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
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Nicola Gennaioli & Andrei Shleifer, 2006.
"Judicial Fact Discretion,"
NBER Working Papers
12679, National Bureau of Economic Research, Inc.
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Giovanni Immordino & Michele Polo, 2008.
"Judicial Errors and Innovative Activity,"
CSEF Working Papers
196, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 18 Jul 2008.
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