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Tort Reform, Disputes and Belief Formation

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Author Info
Landeo, Claudia () (University of Alberta, Department of Economics)

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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.

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File URL: http://www.uofaweb.ualberta.ca/economics2/pdfs/WP2009-12-Landeo.pdf
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Publisher Info
Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2009-12.

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Length: 37 pages
Date of creation: 14 Feb 2009
Date of revision:
Handle: RePEc:ris:albaec:2009_012

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Web page: http://www.uofaweb.ualberta.ca/economics/
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Related research
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;

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Find related papers by 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, and Information
K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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  1. 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. [Downloadable!] (restricted)
  2. Babcock, Linda & Farber, Henry S. & Fobian, Cynthia & Shafir, Eldar, 1995. "Forming beliefs about adjudicated outcomes: Perceptions of risk and reservation values," International Review of Law and Economics, Elsevier, vol. 15(3), pages 289-303, September. [Downloadable!] (restricted)
  3. Michelle J. White, 2004. "Asbestos and the Future of Mass Torts," NBER Working Papers 10308, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Babcock, Linda, et al, 1995. "Biased Judgments of Fairness in Bargaining," American Economic Review, American Economic Association, vol. 85(5), pages 1337-43, December. [Downloadable!] (restricted)
  5. Cooper, David J. & Kagel, John H., 2003. "The impact of meaningful context on strategic play in signaling games," Journal of Economic Behavior & Organization, Elsevier, vol. 50(3), pages 311-337, March. [Downloadable!] (restricted)
  6. Claudia M. Landeo & Maxim Nikitin, 2006. "Split-Award Tort Reform, Firm's Level of Care, and Litigation Outcomes," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(4), pages 571-600, December. [Downloadable!] (restricted)
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  7. Michelle J. White, 2004. "Asbestos and the Future of Mass Torts," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 183-204, Spring. [Downloadable!] (restricted)
  8. Christine Jolls & Cass R. Sunstein, 2006. "Debiasing through Law," Journal of Legal Studies, University of Chicago Press, vol. 35, pages 199-242. [Downloadable!]
  9. Babcock, Linda & Pogarsky, Greg, 1999. "Damage Caps and Settlement: A Behavioral Approach," Journal of Legal Studies, University of Chicago Press, vol. 28(2), pages 341-70, June.
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This page was last updated on 2009-11-26.

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