Incentives to Settle Under Joint and Several Liability
AbstractCongress 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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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7096.
Date of creation: Apr 1999
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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
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-05-03 (All new papers)
- NEP-IND-1999-05-03 (Industrial Organization)
- NEP-LAW-1999-05-03 (Law & Economics)
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