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Deterrence effects under Twombly: on the costs of increasing pleading standards in litigation

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  • Campos, Sergio
  • Cotton, Christopher
  • Li, Cheng

Abstract

We develop a stylized game theoretic model of litigant behavior to study the effects of increased pleading standards on incentives to engage in illegal activity. Such a model is necessary to build intuition about the potential costs associated with the procedures set forth by the U.S. Supreme Court in Bell Atlantic Corp. v. Twombly (550 U.S. 544 [2007]) and Ashcroft v. Iqbal (556 U.S. 662, 684 [2009]), which increase the standard of plausibility that lawsuits must meet before being allowed by a judge to proceed to discovery and trial. We show how increasing pleading standards tends to increase illegal activity, and can increase litigation costs. These negative effects should be accounted for when setting a pleading standard. Our results provide a counterpoint to the U.S. Supreme Court’s argument that increased plausibility requirements will decrease the costs of litigation.

Suggested Citation

  • Campos, Sergio & Cotton, Christopher & Li, Cheng, 2015. "Deterrence effects under Twombly: on the costs of increasing pleading standards in litigation," MPRA Paper 65604, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:65604
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    Cited by:

    1. Andreea Cosnita-Langlais & Jean-Philippe Tropeano, 2018. "How procedures shape substance: institutional design and antitrust evidentiary standards," European Journal of Law and Economics, Springer, vol. 46(1), pages 143-164, August.
    2. Chulyoung Kim, 2018. "Judge’s gate-keeping power and deterrence of negligent acts: an economic analysis of Twombly and Iqbal," European Journal of Law and Economics, Springer, vol. 46(1), pages 39-66, August.

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    More about this item

    Keywords

    Judicial procedure; pleading; litigation; deterrence;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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