Split-Award Tort Reform, Firm's Level of Care and Litigation Outcomes
Journal of Institutional and Theoretical Economics, Forthcoming
Posted: 8 May 2006
We investigate the effect of the split-award tort reform, where the state takes a share of the plaintiff's punitive damage award, on the firm's level of care, the likelihood of trial and the social costs of accidents. A decrease in the plaintiff's share of the punitive damage award reduces the firm's level of care and therefore, increases the probability of accidents. The effects of split-awards on the likelihood of trial and social costs of accidents are ambiguous. Conditions under which a decrease in the plaintiff's share of the punitive damage award reduces the probability of trial and the social cost of accidents are derived.
Keywords: Settlement, Bargaining, Litigation, Asymmetric Information
JEL Classification: K41, C70, D82
Suggested Citation: Suggested Citation