Costly Litigation and Optimal Damages
AbstractA basic principle of law is that damages paid by a liable party should equal the harm caused by that party. However, this principle is not correct when account is taken of litigation costs, because they too are part of the social costs associated with an injury. In this article we examine the influence of litigation costs on the optimal level of damages, assuming that litigation costs rise with the level of damages.
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Bibliographic InfoPaper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 12-005.
Date of creation: Dec 2012
Date of revision:
Find related papers by JEL classification:
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
- K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
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- Hylton, Keith N., 1990. "The influence of litigation costs on deterrence under strict liability and under negligence," International Review of Law and Economics, Elsevier, vol. 10(2), pages 161-171, September.
- Polinsky, A. Mitchell & Shavell, Steven M., 2010. "The Uneasy Case for Product Liability," Working paper 575, Regulation2point0.
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