Should Pain-and-Suffering Damages Be Abolished from Tort Law? More Experimental Evidence
University of Texas at Austin - School of Law
University of Toronto Law Journal, Vol. 55, 2005
Northwestern Law & Econ Research Paper No. 05-24
Should there be pain-and-suffering damages in tort law? Most legal economists say no. Some scholars have reached this conclusion through pure theory. Others have done empirical or experimental work to explore the desirability of pain-and-suffering damages, yet they have reached the conclusion that it is undesirable. In contrast, this paper provides preliminary evidence that it may be desirable to have pain-and-suffering damages in tort law.
Specifically, I present two experimental studies on the demand for pain-and-suffering coverage. The foremost question was whether participants perceive any difference between monetary and non-monetary coverage. In my studies, participants faced insurance decisions involving the purchase of several different types of products: padding for roller skates, a portable saw, computer monitor, trampoline, facial cream, and tires for an SUV. For each product, participants had to state the price that they were willing to pay above the price of the product for monetary and for pain-and-suffering insurance. I then compared the demand for monetary insurance coverage with the demand for pain-and-suffering coverage.
My results in both studies show that the vast majority of the participants treated the two types of insurance the same, either buying them both or buying neither. Moreover, on average, in both studies the majority of participants treated both types of insurance exactly the same, namely, they paid exactly the same amount of money for both types of insurance.
The paper also responds to several objections. Specifically, my study demonstrates that the demand for pain-and-suffering coverage is general and cannot be explained by a demand for coverage for rehabilitation costs or as a way to increase the coverage for monetary insurance coverage.
One of the novelties in this study is methodological. By comparing the relative demand for monetary versus pain-and-suffering coverage, the study overcomes traditional critiques of experiments. Specifically, the study is immune to the participants' cognitive biases, lack of incentives, or computational deficiencies because these problems affect the demand for both types of insurance equally. By comparing relative differences between the demand for monetary versus pain-and-suffering coverage this study controls for these factors.
Number of Pages in PDF File: 41
Date posted: October 27, 2005