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Tort Reform, Disputes and Belief Formation

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  • Landeo, Claudia

    (University of Alberta, Department of Economics)

Abstract

We experimentally study the effects of the split-award tort reform, where the state takes a share of the plaintiff's punitive damage award, on litigants' beliefs and bargaining outcomes. In addition, we study the formation of litigants' beliefs in a strategic environment. Our results provide support for coherence-based reasoning theories: coherence shifts in litigants' background beliefs (elicited before a role is assigned and after commitment to a choice at the pretrial bargaining stage) suggest bi-directionality between choices and beliefs. Our findings also suggest role-specific bias in the updating of plaintiffs' beliefs about firm's negligence. Finally, our findings indicate that split-awards affect plaintiffs' beliefs about fairness and lower out-of-court settlement amounts.

Suggested Citation

  • Landeo, Claudia, 2009. "Tort Reform, Disputes and Belief Formation," Working Papers 2009-12, University of Alberta, Department of Economics.
    • Handle: RePEc:ris:albaec:2009_012
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    References listed on IDEAS

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    4. Landeo, Claudia M. & Nikitin, Maxim & Babcock, Linda, 2007. "Split-awards and disputes: An experimental study of a strategic model of litigation," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 553-572, July.
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    More about this item

    Keywords

    Tort Reform; Belief Formation; Split-Award Statute; Coherence-Based-Reasoning; Role-Specific Bias; Self-Serving Bias; Motivated Reasoning; Settlement; Litigation; Experiments; Debiasing through Law;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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