Accuracy in the Assessment of Damages
Assessment of damages is a principle 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 parties to exercise levels of precaution that better reflect the magnitude of the harm they are likely to generate, and related, it stimulates uninformed parties to learn about risks before acting. However, accuracy in the assessment of harm cannot influence the behavior of parties -- and is therefore of no social value -- to the degree that parties lack knowledge of the harm they might cause when deciding on their precautions. In addition, 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.
|Date of creation:||Mar 1993|
|Date of revision:|
|Publication status:||published as Journal of Law and Economics, vol. XXXIX, no. 1, pp. 191-210, April 1996.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Louis Kaplow & Steven Shavell, 1992.
"Accuracy in the Determination of Liability,"
NBER Working Papers
4203, National Bureau of Economic Research, Inc.
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Journal of Law, Economics and Organization,
Oxford University Press, vol. 8(2), pages 306-20, April.
- Louis Kaplow & Steven Shavell, 1991. "Private Versus Socially Optimal Provision of Ex Ante Legal Advice," NBER Working Papers 3868, National Bureau of Economic Research, Inc.
- Steven Shavell, 2003.
"Economic Analysis of Accident Law,"
NBER Working Papers
9483, National Bureau of Economic Research, Inc.
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- 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.
- 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.
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