Costly Litigation and Optimal Damages
14 Pages Posted: 7 Dec 2012 Last revised: 23 Apr 2023
There are 2 versions of this paper
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
Number of pages: 15
Posted: 18 Nov 2012
Last Revised: 12 Feb 2013
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326
Date Written: December 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.
Suggested Citation: Suggested Citation
Polinsky, A. Mitchell and Shavell, Steven, Costly Litigation and Optimal Damages (December 2012). NBER Working Paper No. w18594, Available at SSRN: https://ssrn.com/abstract=2186323
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