Shifting the Fat‐Tailed Distribution of Blockbuster Punitive Damages Awards

28 Pages Posted: 12 Apr 2014

See all articles by W. Kip Viscusi

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

University of Alabama - School of Law

Multiple version iconThere are 2 versions of this paper

Date Written: June 2014

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.

Suggested Citation

Viscusi, W. Kip and McMichael, Benjamin J., Shifting the Fat‐Tailed Distribution of Blockbuster Punitive Damages Awards (June 2014). Journal of Empirical Legal Studies, Vol. 11, Issue 2, pp. 350-377, 2014, Available at SSRN: https://ssrn.com/abstract=2424084 or http://dx.doi.org/10.1111/jels.12043

W. Kip Viscusi (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
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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
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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

University of Alabama - School of Law ( email )

P.O. Box 870382
Tuscaloosa, AL 35487
United States

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