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Incentives to Settle Under Joint and Several Liability

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Author Info
Howard F. Chang
Hilary Sigman

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Abstract

Congress may soon restrict joint and several liability for cleanup of contaminated sites under Superfund. We explore whether this change would discourage settlements and is therefore likely to increase the program's already high litigation costs. Recent theoretical research by Kornhauser and Revesz finds that joint and several liability may either encourage or discourage settlement, depending upon the correlation of outcomes at trial across defendants. We extend their two-defendant model to a richer framework with N defendants. This extension allows us to test the theoretical model empirically using data on Superfund litigation. We find that joint and several liability does not discourage settlements and may even encourage them. Our results support the model's predictions about the effects of several variables, such as the degree of correlation in trial outcomes.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7096.

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Date of creation: Apr 1999
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Publication status: published as Journal of Legal Studies, Vol. 29, no. 1 (January 2000): 205-236.
Handle: RePEc:nbr:nberwo:7096

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Find related papers by JEL classification:
K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Kessler, Daniel, 1996. "Institutional Causes of Delay in the Settlement of Legal Disputes," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(2), pages 432-60, October.
  2. Theodore Eisenberg & Henry S. Farber, 1996. "The Litigious Plaintiff Hypothesis: Case Selection and Resolution," NBER Working Papers 5649, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Spier, Kathryn E, 1992. "The Dynamics of Pretrial Negotiation," Review of Economic Studies, Blackwell Publishing, vol. 59(1), pages 93-108, January. [Downloadable!] (restricted)
  4. Spier, Kathryn E, 1994. "A Note on Joint and Several Liability: Insolvency, Settlement, and Incentives," Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 559-68, January.
  5. Kahan, Marcel, 1996. "The incentive effects of settlements under joint and several liability," International Review of Law and Economics, Elsevier, vol. 16(4), pages 389-395, December. [Downloadable!] (restricted)
  6. Klerman, Daniel, 1996. "Settling Multidefendant Lawsuits: The Advantage of Conditional Setoff Rules," Journal of Legal Studies, University of Chicago Press, vol. 25(2), pages 445-62, June.
  7. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-79, June. [Downloadable!] (restricted)
  8. Guilkey, David K. & Murphy, James L., 1993. "Estimation and testing in the random effects probit model," Journal of Econometrics, Elsevier, vol. 59(3), pages 301-317, October. [Downloadable!] (restricted)
  9. Donohue, John J, III, 1994. "The Effect of Joint and Several Liability on the Settlement Rate--Mathematical Symmetries and Metaissues about Rational Litigant Behavior: Comment," Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 543-58, January.
  10. Kornhauser, Lewis A & Revesz, Richard L, 1994. "Multidefendant Settlements: The Impact of Joint and Several Liability," Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 41-76, January.
  11. Easterbrook, Frank H & Landes, William M & Posner, Richard A, 1980. "Contribution among Antitrust Defendants: A Legal and Economic Analysis," Journal of Law & Economics, University of Chicago Press, vol. 23(2), pages 331-70, October.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Landeo, Claudia M. & Spier, Kathryn E., 2007. "Naked Exclusion: An Experimental Study of Contracts with Externalities," MPRA Paper 9143, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Colin Hazley & Inkeri Hirvensalo, 2002. "Barriers to Foreign Direct Investmentin the Baltic Sea Region," Discussion Papers 628, The Research Institute of the Finnish Economy. [Downloadable!]
  3. Michelle J. White, 2002. "Explaining the Flood of Asbestos Litigation: Consolidation, Bifurcation, and Bouquet Trials," NBER Working Papers 9362, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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