Costly Litigation and Optimal Damages
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
15 Pages Posted: 18 Nov 2012 Last revised: 12 Feb 2013
There are 2 versions of this paper
Costly Litigation and Optimal Damages
Costly Litigation and Optimal Damages
Date Written: November 1, 2012
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.
JEL Classification: K13, K41
Suggested Citation: Suggested Citation