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The Simple Economics of Class Action: Private Provision of Club and Public Goods

Forthcoming, European Journal of Law and Economics, 32:205–224

ICER Working Paper No. 6/2011

29 Pages Posted: 3 Jun 2011 Last revised: 11 Oct 2012

Alberto Cassone

University of Eastern Piedmont -A. Avogadro - Department of Public Policy and Public Choice

Giovanni Battista Ramello

University of Piemonte Orientale - A. Avogadro - Department of Public Policy and Public Choice; International Centre for Economic Research (ICER)

Date Written: June 1, 2011

Abstract

This article uses economic categories to show how the reorganization of civil procedure in the case of class action is not merely aimed at providing a more efficient litigation technology, as hierarchies (and company law) might do for other productive activities, but that it also serves to create a well defined economic organization ultimately aimed at producing a set of goods, first and foremost among which are justice and efficiency.

Class action has the potential to recreate, in the judicial domain, the same effects that individual interests and motivations, governed by the perfect competition paradigm, bring to the market.

Moreover, through economic analysis it is possible to rediscover not only the productive function of this legal machinery, but also that partial compensation of victims and large profits for the class counsel, far from being a side-effect, are actually a necessary condition for reallocation of the costs and risks associated with the legal action.

Keywords: class action, collective litigation, mass tort, club, liability

JEL Classification: K41, D71, D74, K13, H41

Suggested Citation

Cassone, Alberto and Ramello, Giovanni Battista, The Simple Economics of Class Action: Private Provision of Club and Public Goods (June 1, 2011). Forthcoming, European Journal of Law and Economics, 32:205–224. Available at SSRN: https://ssrn.com/abstract=1857393 or http://dx.doi.org/10.2139/ssrn.1857393

Alberto Cassone

University of Eastern Piedmont -A. Avogadro - Department of Public Policy and Public Choice ( email )

Via Cavour 84
15100 Alessandria, 10129
Italy
+390131283714 (Phone)
+390131283704 (Fax)

Giovanni Battista Ramello (Contact Author)

University of Piemonte Orientale - A. Avogadro - Department of Public Policy and Public Choice ( email )

Via Cavour 84
15100 Alessandria
Italy

International Centre for Economic Research (ICER) ( email )

Villa Gualino
Viale Settimio Severo, 63
10133 Torino
Italy

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