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Damage averaging and the formation of class action suits

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  • Marceau, Nicolas
  • Mongrain, Steeve

Abstract

Within a class action suit, similarly injured individuals can collectively obtain compensation through the justice system. Damage averaging occurs when the compensation awarded by the court to individual members is partly or completely determined by the average damage of the class. The key role of damage averaging in influencing the identity of the individual that will initiate the class action suit is illustrated in a waiting game. If there is complete averaging, the individual with the lowest damage will initiate the class action suit, while if there is less damage averaging, other individuals may do so. Grâce au recours collectif, des individus ayant subi des dommages d'ampleur différente mais de même nature peuvent obtenir compensation en cour. Il est possible que le montant accordé à un individu par la cour ne soit pas strictement une compensation pour les dommages qu'il a subis, mais qu'il réflète aussi, en partie, la moyenne des dommages subis par tous les participants au recours collectif. Envisageant la formation d'un recours collectif comme un jeu d'attente, nous montrons que l'usage de la moyenne des dommages par la cour est un déterminant important de l'identité de celui qui initiera le recours collectif. Si seule la moyenne des dommages est utilisée par la cour dans l'établissement des compensations, alors l'individu ayant subi les plus petits dommages initiera le recours collectif. Si la cour utilise également les dommages individuels dans l'établissement des compensations, alors d'autres individus pourraient vouloir l'initier.
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Suggested Citation

  • Marceau, Nicolas & Mongrain, Steeve, 2003. "Damage averaging and the formation of class action suits," International Review of Law and Economics, Elsevier, vol. 23(1), pages 63-74, March.
  • Handle: RePEc:eee:irlaec:v:23:y:2003:i:1:p:63-74
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    Cited by:

    1. Andrew F. Daughety & Jennifer F. Reinganum, 2011. "A dynamic model of lawsuit joinder and settlement," RAND Journal of Economics, RAND Corporation, vol. 42(3), pages 471-494, September.
    2. Chopard, Bertrand & Cortade, Thomas & Langlais, Eric, 2010. "Trial and settlement negotiations between asymmetrically skilled parties," International Review of Law and Economics, Elsevier, vol. 30(1), pages 18-27, March.
    3. repec:ebl:ecbull:v:11:y:2007:i:2:p:1-7 is not listed on IDEAS
    4. Baumann, Florian & Friehe, Tim, 2009. "On the superiority of damage averaging in the case of strict liability," International Review of Law and Economics, Elsevier, vol. 29(2), pages 138-142, June.
    5. Bruno Deffains & Eric Langlais, 2011. "Informational externalities and settlements in mass tort litigations," European Journal of Law and Economics, Springer, vol. 32(2), pages 241-262, October.
    6. Deffains, Bruno & Langlais, Eric, 2007. "Informational externalities and informational sharing in class action suits," MPRA Paper 4846, University Library of Munich, Germany.
    7. Tim Friehe, 2007. "On the incentive effects of damage averaging in tort law," Economics Bulletin, AccessEcon, vol. 11(2), pages 1-7.
    8. Sophie Harnay & Alain Marciano, 2011. "Seeking rents through class actions and legislative lobbying: a comparison," European Journal of Law and Economics, Springer, vol. 32(2), pages 293-304, October.
    9. Deffains Bruno & Demougin Dominique, 2011. "Class Actions, Compliance and Moral Cost," Review of Law & Economics, De Gruyter, vol. 7(2), pages 481-500, December.

    More about this item

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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