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Costly Litigation and Optimal DamagesSteven ShavellHarvard Law School; National Bureau of Economic Research (NBER) A. Mitchell PolinskyStanford 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 Abstract: 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, K41 Accepted Paper SeriesDate posted: November 18, 2012 ; Last revised: February 12, 2013Suggested CitationContact Information
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