IDEAS home Printed from https://ideas.repec.org/a/ucp/jlstud/doi10.1086-649045.html
   My bibliography  Save this article

Decoupling as Transactions Tax

Author

Listed:
  • Nuno Garoupa
  • Chris William Sanchirico

Abstract

In an influential paper, Polinsky and Che propose that litigation can be made a more cost-effective tool for setting primary activity incentives (such as for product safety or promissory performance) by reducing plaintiffs' recovery while simultaneously raising defendants' damages. Decoupling recovery and damages in this manner reduces the number of filed suits but increases the deterrent impact of each. Litigation costs fall, but if damages are raised sufficiently, the level of deterrence is maintained. Yet this story does not account for the fact that when the state takes from liable defendants more than it gives to victorious plaintiffs, it effectively taxes the transaction that led to the litigation. This tax drives a wedge between the private and social benefits of entering the transaction. The result is that socially beneficial transactions may fail to take place. In this paper we explore how this transaction-discouraging aspect of decoupling affects its propriety.

Suggested Citation

  • Nuno Garoupa & Chris William Sanchirico, 2010. "Decoupling as Transactions Tax," The Journal of Legal Studies, University of Chicago Press, vol. 39(2), pages 469-496.
  • Handle: RePEc:ucp:jlstud:doi:10.1086/649045
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/649045
    Download Restriction: Access to the online full text or PDF requires a subscription.

    File URL: http://dx.doi.org/10.1086/649045
    Download Restriction: Access to the online full text or PDF requires a subscription.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. 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.
    2. A. Mitchell Polinsky & Yeon-Koo Che, 1991. "Decoupling Liability: Optimal Incentives for Care and Litigation," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 562-570, Winter.
    3. A. Mitchell Polinsky, 1986. "Detrebling versus Decoupling Antitrust Damages: Lessons from the Theory of Enforcement," NBER Working Papers 1846, National Bureau of Economic Research, Inc.
    4. Kahan, Marcel & Tuckman, Bruce, 1995. "Special levies on punitive damages: Decoupling, agency problems, and litigation expenditures," International Review of Law and Economics, Elsevier, vol. 15(2), pages 175-185, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Goerke, Laszlo & Neugart, Michael, 2015. "Lobbying and dismissal dispute resolution systems," International Review of Law and Economics, Elsevier, vol. 41(C), pages 50-62.
    2. D’Antoni, Massimo & Tabbach, Avraham D., 2014. "Inadequate compensation and multiple equilibria," International Review of Law and Economics, Elsevier, vol. 38(C), pages 33-47.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jlstud:doi:10.1086/649045. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division). General contact details of provider: http://www.journals.uchicago.edu/JLS/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.