Time Is Money: An Empirical Assessment of Non-Economic Damages Arguments

Abstract

Non-economic damages (pain and suffering) are the most significant and variable components of liability. Our survey of 51 U.S. jurisdictions shows wide heterogeneity in whether attorneys may quantify damages as time-units of suffering (“per diem”) or demand a specific amount (“lump sum”). Either sort of large number could exploit an irrational anchoring effect.

We performed a realistic online, video-based experiment with 732 human subjects. We replicate prior work showing that large lump sum demands drive larger jury verdicts, but surprisingly find no effect of similarly-sized per diem anchors. We do find per diem effects on binary liability outcomes, and thus expected case values, however, and we discuss potential causal mechanisms, based in the cognitive science literature.

This empirical work contradicts the speculations by scholars and courts that per diem arguments powerfully impact damage awards. Nonetheless, plaintiffs lawyers have been wise to use per diem arguments when allowed to do so, since our data surprisingly shows them enhancing the expected value of cases by increasing win rates. Past justifications for prohibition are not supported by empirical data.

Keywords: empirical, remedies, damages, non-economic, anchoring, per diem, tort

JEL Classification: K13