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Legal compliance and litigation spending under the English and American rule: Experimental evidence

Listed author(s):
  • Baptiste Massenot
  • Maria Maraki
  • Christian Thoeni

We investigate fee-shifting rules in litigation with regard to their impact on legal compliance, settlement, and litigation spending. We develop a model to compare the English rule, according to which the winning party is compensated by the losing party, to the American rule, according to which parties pay their own expenses independent of the outcome of the trial. We conduct an experiment to put the predictions to an empirical test. In accordance with the model, we find that litigants spend substantially more under the English rule than under the American rule. Defendants are significantly more compliant under the English rule when out-of-court settlement is not possible, but not when settlement is possible. Settlement rates do not significantly differ between the two rules, nor do they differ within the subsets of strong or weak cases.

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File URL: http://hec.unil.ch/attachments/deep/series/2016/16.19.pdf
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Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 16.19.

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Length: 34 pp.
Date of creation: Oct 2016
Handle: RePEc:lau:crdeep:16.19
Contact details of provider: Postal:
Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne

Phone: ++41 21 692.33.20
Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
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