Improved Statistical Methods for the Calculation of Damages in Discrimination Lawsuits

56 Pages Posted: 12 Dec 2017  

Scott Susin

US Dept. of HUD

Ioan Voicu

Office of the Comptroller of the Currency (OCC)

Date Written: November 14, 2016

Abstract

This paper develops a new method to calculate individual-specific damage payments in discrimination lawsuits using empirical Bayes techniques and a simple random coefficients model. The method yields payments that can be mathematically proven to be more accurate than existing statistically-based approaches, as measured by the mean squared error. This method also provides a natural justification for zero payments to members of the non-injured class and substantially reduces the bias caused by the legal restriction on negative payments. We empirically demonstrate our method in the context of mortgage pricing decisions using detailed loan-level data from a large subprime lender.

Keywords: Empirical Bayes, Discrimination, Class Action

JEL Classification: K13, J15, J71

Suggested Citation

Susin, Scott and Voicu, Ioan, Improved Statistical Methods for the Calculation of Damages in Discrimination Lawsuits (November 14, 2016). Journal of Legal Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3085007 or http://dx.doi.org/10.2139/ssrn.3085007

Scott Susin (Contact Author)

US Dept. of HUD ( email )

United States
202-402-3948 (Phone)

Ioan Voicu

Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street SW
Washington, DC 20219
United States

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