Not Available for Download

Should Plaintiffs Win What Defendants Lose?: Litigation Stakes, Litigation Effort, and the Benefits of 'Decoupling'

Posted: 19 Jan 2004  

Albert H. Choi

University of Virginia School of Law

Chris William Sanchirico

University of Pennsylvania Law School; University of Pennsylvania Wharton School - Business Economics and Public Policy Department

Multiple version iconThere are 2 versions of this paper

Abstract

Professors Polinsky and Che advocate decoupling what plaintiffs recover from what defendants pay in damages, specifically arguing that lowering recovery and raising damages (by appropriate amounts) delivers the same level of primary activity deterrence with fewer filed suits. Professors Kahan and Tuckman extend Polinsky and Che's analysis to account for the effect of parties' litigation stakes on the cost of each filed suit, provisionally concluding that Polinsky and Che's basic argument remains intact. This article reaches a different conclusion. We show that when the effect of litigation stakes on litigation effort is more fully taken into account, lowering recovery and raising damages may no longer improve social welfare. In addition, we characterize the kinds of suits in which the optimal level of recovery is no less than the optimal level of damages. Of rhetorical significance in the current policy debate, we find that such suits resemble the negative picture of modern litigation invoked by some advocates of reduced recovery. Our basic findings are robust to the possibility of out-of-court settlement, plaintiffs' employment of contingent fee lawyers, and alternative fee-shifting rules.

Suggested Citation

Choi, Albert H. and Sanchirico, Chris William, Should Plaintiffs Win What Defendants Lose?: Litigation Stakes, Litigation Effort, and the Benefits of 'Decoupling'. U of Penn, Inst for Law & Econ Research Paper 04-02; USC CLEO Research Paper No. C02-7. Available at SSRN: https://ssrn.com/abstract=490323

Albert H. Choi

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

Chris William Sanchirico (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-898-4220 (Phone)

HOME PAGE: http://www.law.upenn.edu/faculty/csanchir/

University of Pennsylvania Wharton School - Business Economics and Public Policy Department

3641 Locust Walk
Philadelphia, PA 19104-6372
United States

Paper statistics

Abstract Views
976