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Judge's Gate-Keeping Power and Deterrence of Negligent Acts: An Economic Analysis of Twombly and Iqbal

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  • Kim, Chulyoung

Abstract

Following its landmark decisions in Bell Atlantic v. Twombly and Ashcroft v. Iqbal, the Supreme Court allows federal judges to dismiss cases when the plaintiff's allegations are conclusory or implausible, thereby increasing the judges' discretionary power in pleading stages of litigation. Using a stylized litigation model, I find the conditions under which the ruling improves upon litigation outcomes by simultaneously raising deterrence and reducing litigation costs and error costs. In particular, I demonstrate the ways in which the ruling's effect depends on the correlation between the potential injurers' primary behavior and the strength of cases filed at trial courts.

Suggested Citation

  • Kim, Chulyoung, 2015. "Judge's Gate-Keeping Power and Deterrence of Negligent Acts: An Economic Analysis of Twombly and Iqbal," MPRA Paper 69836, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:69836
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    File URL: https://mpra.ub.uni-muenchen.de/69836/1/MPRA_paper_69836.pdf
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    References listed on IDEAS

    as
    1. Dominique Demougin & Claude Fluet, 2008. "Rules of proof, courts, and incentives," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 20-40.
    2. Kaplow, Louis, 1994. "The Value of Accuracy in Adjudication: An Economic Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 307-401, January.
    3. Kaplow, Louis & Shavell, Steven, 1994. "Accuracy in the Determination of Liability," Journal of Law and Economics, University of Chicago Press, vol. 37(1), pages 1-15, April.
    4. Campos, Sergio J. & Cotton, Christopher S. & Li, Cheng, 2015. "Deterrence effects under Twombly: On the costs of increasing pleading standards in litigation," International Review of Law and Economics, Elsevier, vol. 44(C), pages 61-71.
    5. Michael P. Stone & Thomas J. Miceli, 2013. "The Impact of Frivolous Lawsuits on Deterrence: Do They Have Some Redeeming Value?," Working papers 2013-26, University of Connecticut, Department of Economics.
    6. Louis Kaplow, 2011. "On the Optimal Burden of Proof," Journal of Political Economy, University of Chicago Press, vol. 119(6), pages 1104-1140.
    7. Nicola Persico, 2002. "Racial Profiling, Fairness, and Effectiveness of Policing," American Economic Review, American Economic Association, vol. 92(5), pages 1472-1497, December.
    8. Rosenberg, David & Shavell, Steven, 2006. "A solution to the problem of nuisance suits: The option to have the court bar settlement," International Review of Law and Economics, Elsevier, vol. 26(1), pages 42-51, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Twombly; Iqbal; deterrence; litigation costs; error costs; perfect Bayesian equilibrium;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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