Economic Analysis of Litigation and the Legal Process

66 Pages Posted: 20 Feb 2003

See all articles by Steven Shavell

Steven Shavell

Harvard Law School; National Bureau of Economic Research (NBER)

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Date Written: February 2003


This paper contains the chapters on litigation and the legal process from a general, forthcoming book, Foundations of Economic Analysis of Law (Harvard University Press, 2003). In chapter 17, I consider the basic theory of litigation. Here I describe the three phases of litigation: its initiation through suit, the determination of whether the parties will settle their case or proceed to trial, and, if trial results, the trial expenditures. I also analyze the social desirability of their decisions, a major theme being that the private incentives to litigate may diverge from what is socially desirable. In chapter 18, I extend the basic theory of litigation, examining among other issues the bringing of negative value suits, shifting of legal fees to losers at trial, lawyer-client fee arrangements, and the influence of insurers on litigation. Then, in chapter 19, I discuss several general aspects of the legal process not considered in the basic theory and its extensions, including private systems of adjudication, the value of accuracy in adjudication, the appeals process, and the function of legal advice.

JEL Classification: D00, D6, D8, K00, K4

Suggested Citation

Shavell, Steven, Economic Analysis of Litigation and the Legal Process (February 2003). Harvard Law and Economics Discussion Paper No. 404, Available at SSRN: or

Steven Shavell (Contact Author)

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