Accuracy in the Assessment of Damages

24 Pages Posted: 28 Dec 2006 Last revised: 20 Sep 2010

See all articles by Louis Kaplow

Louis Kaplow

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

Steven Shavell

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

Date Written: March 1993

Abstract

Assessment of damages is a principle issue in litigation and, in light of this, we consider the social justification for, and the private benefits of, accurate measurement of harm. Greater accuracy induces parties to exercise levels of precaution that better reflect the magnitude of the harm they are likely to generate, and related, it stimulates uninformed parties to learn about risks before acting. However, accuracy in the assessment of harm cannot influence the behavior of parties -- and is therefore of no social value -- to the degree that parties lack knowledge of the harm they might cause when deciding on their precautions. In addition, regardless of the social value of accuracy, litigants generally gain by devoting resources toward proof of damages, leading often to socially excessive private incentives to establish damages.

Suggested Citation

Kaplow, Louis and Shavell, Steven, Accuracy in the Assessment of Damages (March 1993). NBER Working Paper No. w4287. Available at SSRN: https://ssrn.com/abstract=478720

Louis Kaplow (Contact Author)

Harvard Law School ( email )

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617-495-4101 (Phone)
617-496-4880 (Fax)

HOME PAGE: http://www.law.harvard.edu/faculty/directory/facdir.php?id=32&show=bibliography

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Steven Shavell

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States
617-495-3668 (Phone)
617-496-2256 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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