Punitive Damages as a Social Harm Measure: Economic Analysis Continues

50 Pages Posted: 12 Dec 2008

Date Written: 2006


This article is an attempt to determine on the economic basis the optimal amount of punitive damages in a tort case. For proper deterrence, the optimal amount of damages consists of two components. The first is the "primary losses" inflicted to the victim. The second is the "secondary losses" inflicted to the society, estimated as the amount of the defendant's illicit gains. To reflect the non-unity probability of holding the injurer liable, both components should be inflated by relevant multipliers. The overcompensatory part of the first component may be called "supercompensatory" damages; the second component - "truly punitive" damages. For proper motivation of plaintiffs, the optimal award is the sum of the compensatory and supercompensatory damages; the truly punitive damages should be kept by the state. While the optimal-charge formula is in some correspondence with the existing law, the proposed split-award rule would require a radical statutory reform for implementation.

Keywords: Punitive damages, williams, economic analysis

JEL Classification: K13

Suggested Citation

Budylin, Sergey, Punitive Damages as a Social Harm Measure: Economic Analysis Continues (2006). Oklahoma City University Law Review, Vol. 31, No. 3, pp. 457-505, 2006. Available at SSRN: https://ssrn.com/abstract=1314712

Sergey Budylin (Contact Author)

Roche and Duffay ( email )

Petrovka 15/13
Second Floor

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