Abstract

http://ssrn.com/abstract=874194
 
 

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Welfare Implications of Costly Litigation under Strict Liability


Keith N. Hylton


William Fairfield Warren Distinguished Professor, Boston University; Professor of Law, Boston University School of Law


American Law and Economics Review, Vol. 4, No. 1, pp. 18-43, 2002

Abstract:     
This article examines a model of strict liability with costly litigation and presents conditions under which (1) potential injurers take optimal precautions, (2) increasing the cost of litigation enhances precaution and social welfare, (3) the optimal level of liability exceeds the compensatory level, and (4) increasing the rate of settlement enhances social welfare. The results have implications for controversies surrounding fee shifting, optimal damage awards (e.g., punitive damages), and the social desirability of settlement. The most striking implication is that fee shifting in favor of prevailing plaintiffs is socially desirable in low-transaction-cost settings.

Accepted Paper Series


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Date posted: February 29, 2008  

Suggested Citation

Hylton, Keith N., Welfare Implications of Costly Litigation under Strict Liability. American Law and Economics Review, Vol. 4, No. 1, pp. 18-43, 2002. Available at SSRN: http://ssrn.com/abstract=874194

Contact Information

Keith N. Hylton (Contact Author)
William Fairfield Warren Distinguished Professor, Boston University ( email )
595 Commonwealth Avenue
Boston, MA 02215
United States
617-353-8959 (Phone)
Professor of Law, Boston University School of Law ( email )
765 Commonwealth Avenue
Boston, MA 02215
United States
617-353-8959 (Phone)
617-353-3077 (Fax)
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