A Note on Private versus Social Incentives to Sue in a Costly Legal System
12 Pages Posted: 22 Feb 2013
Date Written: January 21, 1983
This article presents a game-theoretic model of costly litigation. The model shows that where an injurer can calibrate the level of damages done to other parties, it sacrifices in profits an amount related to the victim's litigation costs by inducing suit. Thus the structure of the legal system implicitly internalizes the costs of litigation. Whether complete internalization occurs depends on such considerations as the information of the parties and the injurer's ability to control damages precisely.
Keywords: Incentives to Sue, American Rule, English Rule
JEL Classification: K41
Suggested Citation: Suggested Citation