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Accuracy in the Assessment of Damages

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  • Kaplow, Louis
  • Shavell, Steven

Abstract

Assessment of damages is a principal issue in litigation and, in light of this, we consider the social justification for, and the private benefits of, accurate measurement of harm. Greater accuracy induces injurers to exercise levels of precaution that better reflect the magnitude of the harm they are likely to generate, and, relatedly, it stimulates uninformed injurers to learn about risks before acting. However, accuracy in assessment of harm cannot influence the behavior of injurers--and is therefore of no social value--to the degree that they lack knowledge of the harm they might cause when deciding on their precautions. Regardless of the social value of accuracy, litigants generally gain by devoting resources toward proof of damages, leading often to socially excessive private incentives to establish damages. Copyright 1996 by the University of Chicago.

Suggested Citation

  • Kaplow, Louis & Shavell, Steven, 1996. "Accuracy in the Assessment of Damages," Journal of Law and Economics, University of Chicago Press, vol. 39(1), pages 191-210, April.
  • Handle: RePEc:ucp:jlawec:v:39:y:1996:i:1:p:191-210
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    File URL: http://dx.doi.org/10.1086/467347
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    References listed on IDEAS

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    1. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc.
    2. Hay, Bruce L, 1994. "Civil Discovery: Its Effects and Optimal Scope," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 481-515, January.
    3. Kaplow, Louis & Shavell, Steven, 1994. "Accuracy in the Determination of Liability," Journal of Law and Economics, University of Chicago Press, vol. 37(1), pages 1-15, April.
    4. Kaplow, Louis, 1995. "A Model of the Optimal Complexity of Legal Rules," Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(1), pages 150-163, April.
    5. Png, I. P. L., 1986. "Optimal subsidies and damages in the presence of judicial error," International Review of Law and Economics, Elsevier, vol. 6(1), pages 101-105, June.
    6. Kaplow, Louis & Shavell, Steven, 1992. "Private versus Socially Optimal Provision of Ex Ante Legal Advice," Journal of Law, Economics, and Organization, Oxford University Press, vol. 8(2), pages 306-320, April.
    7. Craswell, Richard & Calfee, John E, 1986. "Deterrence and Uncertain Legal Standards," Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(2), pages 279-303, Fall.
    8. Polinsky, A Mitchell & Shavell, Steven, 1989. "Legal Error, Litigation, and the Incentive to Obey the Law," Journal of Law, Economics, and Organization, Oxford University Press, vol. 5(1), pages 99-108, Spring.
    9. Daniel L. Rubinfeld & David E.M. Sappington, 1987. "Efficient Awards and Standards of Proof in Judicial Proceedings," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 308-315, Summer.
    10. Louis Kaplow, 1994. "Optimal Insurance Contracts When Establishing the Amount of Losses Is Costly," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 19(2), pages 139-152, December.
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    JEL classification:

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

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