Costly Litigation and Optimal Damages
Harvard Law School; National Bureau of Economic Research (NBER)
A. Mitchell Polinsky
Stanford Law School; National Bureau of Economic Research (NBER)
November 1, 2012
Stanford Law and Economics Olin Working Paper No. 436
Harvard Law and Economics Olin Working Paper No. 739
Harvard Law School Program on Risk Regulation Research Paper No. 13-06
A basic principle of law is that damages paid by a liable party should equal the harm caused by that party. However, this principle is not correct when account is taken of litigation costs, because they too are part of the social costs associated with an injury. In this article we examine the influence of litigation costs on the optimal level of damages, assuming that litigation costs rise with the level of damages.
Number of Pages in PDF File: 15
JEL Classification: K13, K41Accepted Paper Series
Date posted: November 18, 2012 ; Last revised: February 12, 2013
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