Welfare Implications of Costly Litigation Under Strict Liability

Posted: 2 Oct 2001

See all articles by Keith N. Hylton

Keith N. Hylton

Boston University - School of Law

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This paper examines a model of strict liability with costly litigation, and presents the conditions under which: (1) potential injurers take optimal precautions, (2) increasing litigation costs enhance precaution and social welfare, (3) the optimal level of liability exceeds the compensatory level, and (4) increasing the rate of settlement increases social welfare. The results have implications for controversies surrounding optimal damage awards (e.g., punitive versus compensatory), fee shifting, and the desirability of settlement.

Suggested Citation

Hylton, Keith N., Welfare Implications of Costly Litigation Under Strict Liability. American Law and Economics Review, Vol. 4, No. 1, pp. 18-43, 2002. Available at SSRN: https://ssrn.com/abstract=285857

Keith N. Hylton (Contact Author)

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States
617-353-8959 (Phone)
617-353-3077 (Fax)

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