Information and Externalities in Sequential Litigation

31 Pages Posted: 19 Dec 2004 Last revised: 14 Aug 2009

See all articles by Xinyu Hua

Xinyu Hua

Northwestern University - Kellogg School of Management

Kathryn E. Spier

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

Multiple version iconThere are 2 versions of this paper

Date Written: December 2004

Abstract

The information created and disseminated through the litigation process can have social value. Suppose a long-lived plaintiff is suing a defendant for damages sustained in an accident. The plaintiff may suffer similar damages in future accidents involving different defendants. Potential injurers update their beliefs after observing the first case and subsequently fine-tune their precautions to avoid accidents. The joint incentive of the plaintiff and the first defendant to create public information through litigation is too small. The optimal liability rule trades off providing future injurers with incentives to take precautions and providing the plaintiff with incentives to create information.

Suggested Citation

Hua, Xinyu and Spier, Kathryn E., Information and Externalities in Sequential Litigation (December 2004). NBER Working Paper No. w10943, Available at SSRN: https://ssrn.com/abstract=629585

Xinyu Hua

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Kathryn E. Spier (Contact Author)

Harvard University - Law School - Faculty ( email )

1575 Massachusetts
Hauser 302
Cambridge, MA 02138
United States
(617) 496-0019 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
30
Abstract Views
725
PlumX Metrics