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``Predictable and Unpredictable Error in Tort Awards: The Effect of Plaintiff Self Selection and Signalling,''

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  • Eric Rasmusen

    (Indiana University School of Business)

Abstract

If a potential tort plaintiff can predict that the court will overestimate damages he is more likely to bring suit, but if the court is aware of this, it will adjust its awards accordingly. In general, court error implies that the court should moderate extreme awards whether they are high or low, because of regression towards the mean. Predictable error, however, tends to push the optimal adjustment downwards and unpredictable error pushes it upwards, because of plaintiff selection and signalling, respectively. The expectation of either kind of error leads plaintiffs to bring meritless suits.

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Bibliographic Info

Paper provided by EconWPA in its series Law and Economics with number 9506003.

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Date of creation: 14 Jun 1995
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Handle: RePEc:wpa:wuwple:9506003

Note: A 79KB LaTeX file. A postscript file is available on request from Erasmuse@Indiana.edu.
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  17. Bebchuk, Lucian Arye, 1988. "Suing Solely to Extract a Settlement Offer," The Journal of Legal Studies, University of Chicago Press, vol. 17(2), pages 437-50, June.
  18. Rasmusen, Eric, 1992. "Managerial Conservatism and Rational Information Acquisition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(1), pages 175-201, Spring.
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Cited by:
  1. Göran Skogh & Luisa Tibiletti, 1999. "Compensation of Uncertain Lost Earnings," European Journal of Law and Economics, Springer, vol. 8(1), pages 51-61, July.

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