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The Simple Economics of Class Action: Private Provision of Club and Public Goods

Author

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  • Alberto Cassone

    ()

  • Giovanni B. Ramello

    ()

Abstract

This article uses economic categories to show how the reorganisation of civil procedure in the case of class action is not merely aimed at providing a more efficient litigation technology, as hierarchies (and company law) might do for other productive activities, but that it also serves to create a well defined economic organization ultimately aimed at producing a set of goods, first and foremost among which are justice and efficiency. Class action has the potential to recreate, in the judicial domain, the same effects that individual interests and motivations, governed by the perfect competition paradigm, bring to the market. Moreover, through economic analysis it is possible to rediscover not only the productive function of this legal machinery, but also that partial compensation of victims and large profits for the class counsel, far from being a side-effect, are actually a necessary condition for reallocation of the costs and risks associated with the legal action.

Suggested Citation

  • Alberto Cassone & Giovanni B. Ramello, 2011. "The Simple Economics of Class Action: Private Provision of Club and Public Goods," ICER Working Papers 06-2011, ICER - International Centre for Economic Research.
  • Handle: RePEc:icr:wpicer:06-2011
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    File URL: http://www.bemservizi.unito.it/repec/icr/wp2011/ICERwp06-11.pdf
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    References listed on IDEAS

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    1. Edward L. Glaeser & Andrei Shleifer, 2003. "The Rise of the Regulatory State," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 401-425, June.
    2. 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.
    3. Nicita Antonio & Ramello Giovanni B., 2007. "Property, Liability and Market Power: The Antitrust Side of Copyright," Review of Law & Economics, De Gruyter, vol. 3(3), pages 767-791, December.
    4. Cornes,Richard & Sandler,Todd, 1996. "The Theory of Externalities, Public Goods, and Club Goods," Cambridge Books, Cambridge University Press, number 9780521477185.
    5. Edwards, Brian K & Starr, Ross M, 1987. "A Note on Indivisibilities, Specialization, and Economies of Scale," American Economic Review, American Economic Association, vol. 77(1), pages 192-194, March.
    6. Donatella Porrini & Giovanni B. Ramello, 2011. "Class action and financial markets: insights from law and economics," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 3(2), pages 140-160, May.
    7. Giovanni Ramello, 2011. "Property rights and externalities: the uneasy case of knowledge," European Journal of Law and Economics, Springer, vol. 31(1), pages 123-141, February.
    8. Marta Cenini & Barbara Luppi & Francesco Parisi, 2011. "Incentive effects of class actions and punitive damages under alternative procedural regimes," European Journal of Law and Economics, Springer, vol. 32(2), pages 229-240, October.
    9. repec:hrv:faseco:30747197 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Donatella Porrini & Giovanni B. Ramello, 2011. "Class action and financial markets: insights from law and economics," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 3(2), pages 140-160, May.
    2. Thomas Ulen, 2011. "An introduction to the law and economics of class action litigation," European Journal of Law and Economics, Springer, vol. 32(2), pages 185-203, October.
    3. Marta Cenini & Barbara Luppi & Francesco Parisi, 2011. "Incentive effects of class actions and punitive damages under alternative procedural regimes," European Journal of Law and Economics, Springer, vol. 32(2), pages 229-240, October.
    4. Lorenzo Sacconi, 2011. "The case against lawyers’ contingent fees and the misapplication of principal-agent models," European Journal of Law and Economics, Springer, vol. 32(2), pages 263-292, October.
    5. repec:eee:soceps:v:62:y:2018:i:c:p:31-43 is not listed on IDEAS
    6. Ramello, Giovanni B., 2012. "Aggregate litigation and regulatory innovation: Another view of judicial efficiency," International Review of Law and Economics, Elsevier, vol. 32(1), pages 63-71.
    7. 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.
    8. Juergen Backhaus & Alberto Cassone & Giovanni Ramello, 2011. "The law and economics of class actions," European Journal of Law and Economics, Springer, vol. 32(2), pages 165-168, October.
    9. repec:kap:ejlwec:v:44:y:2017:i:2:d:10.1007_s10657-017-9568-1 is not listed on IDEAS

    More about this item

    Keywords

    class action; collective litigation; mass tort; club; liability; deterrence;

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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