Common Law Efficiency When Joinder and Class Actions Fail as Aggregation Devices

17 Pages Posted: 18 Nov 2018 Last revised: 22 Mar 2019

See all articles by Frank Fagan

Frank Fagan

EDHEC Business School

Urmee Khan

Department of Economics, University of California, Riverside

Date Written: November 5, 2018

Abstract

We develop a litigant-based model of rule selection where parties choose to litigate rules that are efficient between two parties, but inefficient as between a potential class or potentially joined litigants and a counter-party. Collective action problems lead to incomplete party formation, which generates continuous litigation of seemingly efficient rules. By accounting for externalities borne by non-parties, we show that rules which are allocatively efficient across both parties and non-parties are evolutionary stable for any given judicial ideology or judicial preference for prestige, thus preserving the explanatory power of the Efficiency of Common Law Hypothesis.

Keywords: Efficient Common Law Hypothesis, Joinder, Class Actions, Baconian Judges

JEL Classification: K13, K15, K41

Suggested Citation

Fagan, Frank and Khan, Urmee, Common Law Efficiency When Joinder and Class Actions Fail as Aggregation Devices (November 5, 2018). European Journal of Law and Economics, Vol. 47, No. 1, p. 1, 2019. Available at SSRN: https://ssrn.com/abstract=3278764

Frank Fagan (Contact Author)

EDHEC Business School ( email )

58 rue du Port
Lille, 59046
France

Urmee Khan

Department of Economics, University of California, Riverside ( email )

900 University Avenue
Riverside, CA 92521
United States

HOME PAGE: http://www.urmeekhan.net

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