Cognitive Coherence and Tort Reform

35 Pages Posted: 19 Feb 2007 Last revised: 9 Sep 2009

See all articles by Claudia M. Landeo

Claudia M. Landeo

University of Alberta - Department of Economics

Date Written: July 26, 2009

Abstract

We experimentally study the effects of the split-award tort reform, where the state takes a share of the plaintiff's punitive damage award, on litigants' beliefs and bargaining outcomes. In addition, we study the formation of litigants' beliefs in a strategic environment. Our results provide support for coherence-based reasoning theories: coherence shifts in litigants' background beliefs (elicited before a role is assigned and after commitment to a choice at the pretrial bargaining stage) suggest bi-directionality between choices and beliefs. Our findings also suggest role-specific bias in the updating of plaintiffs' beliefs about firm's negligence. Finally, our findings indicate that split-awards affect plaintiffs' beliefs about fairness and lower out-of-court settlement amounts.

Keywords: Tort Reform, Belief Formation, Split-Award Statute, Coherence-Based Reasoning, Role-Specific Bias, Self-Serving Bias, Motivated Reasoning, Settlement, Litigation, Experiments, Debiasing through Law, Experiments

JEL Classification: K41, C90, D83, A12

Suggested Citation

Landeo, Claudia M., Cognitive Coherence and Tort Reform (July 26, 2009). Journal of Economic Psychology, Forthcoming, 2nd Annual Conference on Empirical Legal Studies Paper, Available at SSRN: https://ssrn.com/abstract=957753 or http://dx.doi.org/10.2139/ssrn.957753

Claudia M. Landeo (Contact Author)

University of Alberta - Department of Economics ( email )

Henry Marshall Tory Building 7-25
Edmonton, Alberta T6G 2H4
Canada

HOME PAGE: http://sites.google.com/a/ualberta.ca/claudia-m-landeo-s-home-page/home

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