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The Social versus the Private Incentive to Bring Suit in a Costly Legal System

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  • Steven Shavell

Abstract

The question is asked how the incentives of private parties to bring suit relate to what would be socially appropriate given the costs of using the legal system; and the answer presented in the model that is examined involves two elements. The first is that as a potential plaintiff takes into account only his own legal expenses in deciding whether to bring suit, the private cost of suit is evidently less than the social cost (which would include the defendant's legal expenses), suggesting a tendency toward excessive litigation, other things equal. But consideration of the second element complicates matters: as the plaintiff takes into account his own expected gains but not the social gains attaching to suit (which in the model is the general effect of suit on potential defendants' behavior), and as these social gains could be either larger or smaller than his gains, there is a tendency in respect to litigation that could either counter or reinforce the previous tendency.

Suggested Citation

  • Steven Shavell, 1981. "The Social versus the Private Incentive to Bring Suit in a Costly Legal System," NBER Working Papers 0741, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0741
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    File URL: http://www.nber.org/papers/w0741.pdf
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    References listed on IDEAS

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    1. William M. Landes & Richard A. Posner, 1978. "Adjudication as a Private Good," NBER Working Papers 0263, National Bureau of Economic Research, Inc.
    2. A. Mitchell Polinsky, 1979. "Private versus Public Enforcement of Fines," NBER Working Papers 0338, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Bebchuk, Lucian Arye & Chang, Howard F, 1996. "An Analysis of Fee Shifting Based on the Margin of Victory: On Frivolous Suits, Meritorious Suits, and the Role of Rule 11," The Journal of Legal Studies, University of Chicago Press, vol. 25(2), pages 371-403, June.
    2. Thomas J. Miceli & Kathleen Segerson, 2001. "Should Victims of Exposure to a Toxic Substance Have an Independent Claim for Medical Monitoring?," Working papers 2002-41, University of Connecticut, Department of Economics, revised Jan 2002.
    3. Chulyoung Kim, 2014. "Adversarial and Inquisitorial Procedures with Information Acquisition," Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(4), pages 767-803.

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