Optimal plaintiff incentives when courts are imperfect
AbstractThe incentives of a plaintiff in a lawsuit are affected by a variety of legal rules. One leading example is the proportion of the fine imposed on the defendant that is awarded to the plaintiff. Another is the identity of the plaintiff himself: private litigants are motivated by the prospect of receiving damages, while government employed plaintiffs (such as public prosecutors and employees of regulatory agencies) are instead rewarded (if at all) by career advancement. The paper examines the interaction between court characteristics and plaintiff incentives on the deterrence provided by contracts/laws/regulations. It shows that a key determinant of the optimal level of plaintiff incentives is the extent to which a party arguing ``against the facts'' is able to influence the court. When such influence is possible, it is generally optimal to restrict plaintiff incentives. Implications for the use of split-award statutes, loser-pays rules, class action lawsuits, and public enforcement are discussed. In more general terms, the paper makes precise an avenue via which legal rules affect the efficacy of a legal system
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 723.
Date of creation: 2004
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Plaintiff behavior; deterrence; legal procedure;
Find related papers by JEL classification:
- K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-02 (All new papers)
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