Download this Paper Open PDF in Browser

Shifting the Fat-Tailed Distribution of Blockbuster Punitive Damages Awards

43 Pages Posted: 23 Jul 2013  

W. Kip Viscusi

Vanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics

Benjamin J. McMichael

Vanderbilt University - Owen Graduate School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: July 23, 2013

Abstract

The distribution of blockbuster punitive damages awards has fat tails similar to the distributions of losses from natural disasters. Extremely large awards occur more often and are more difficult to predict than if blockbuster awards were distributed normally. The size and predictability of awards are important factors in the U.S. Supreme Court’s decisions on punitive damages. This article examines the effect of the Court’s decision in State Farm v. Campbell on blockbuster punitive damages awards. State Farm shifts the fat tail of the distribution of blockbuster awards down (or “thins” the tail), which is consistent with a restraining effect on award size. State Farm reduces the size of blockbuster awards in general, but this reduction is most salient in the upper half of the distribution of awards. State Farm also has a negative influence on the probability of exceeding a single digit ratio between punitive and compensatory damages. This article also examines the largest awards and considers why defendants may not pay large punitive damages awards.

Keywords: punitive damages, blockbuster awards, fat tail, State Farm, product liability, tort

JEL Classification: K10, K13, K40, K41

Suggested Citation

Viscusi, W. Kip and McMichael, Benjamin J., Shifting the Fat-Tailed Distribution of Blockbuster Punitive Damages Awards (July 23, 2013). Vanderbilt Law and Economics Research Paper No. 13-18. Available at SSRN: https://ssrn.com/abstract=2297577 or http://dx.doi.org/10.2139/ssrn.2297577

W. Kip Viscusi (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-343-7715 (Phone)
615-322-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Vanderbilt University - Department of Economics

Box 1819 Station B
Nashville, TN 37235
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Owen Graduate School of Management

401 21st Avenue South
Nashville, TN 37203
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Strategy and Business Economics ( email )

Nashville, TN 37203
United States

Benjamin J. McMichael

Vanderbilt University - Owen Graduate School of Management ( email )

401 21st Avenue South
Nashville, TN Tennessee 37203
United States

Paper statistics

Downloads
72
Rank
275,386
Abstract Views
1,212