Modeling the Likely Effects of Litigation Financing
52 Pages Posted: 16 Oct 2015 Last revised: 2 Oct 2016
Date Written: October 14, 2015
The arguments for and against third-party litigation financing are based on incorrect assumptions regarding the impacts on total litigation. A formal model incorporating the choices of plaintiff, lawyer, and financier shows only minimal impact on total litigation, largely positive. However, after addressing the potential for long-term, strategic behavior by financiers, it is obvious that some dangers remain. Divorced from the dramatic claims of proponents and opponents, litigation financing is merely a tool that can be used for good or bad, and differentiating by types of claims and the incentives of the parties allows that tool to be appropriately used.
Keywords: tort reform, frivolous litigation, public choice, rent-seeking
JEL Classification: D70, D72, K13,
Suggested Citation: Suggested Citation