Litigation and Settlement under Court Error

Philipp Ackermann

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: Settlements are often considered to be welfare-enhancing because they save time and litigation costs. In the presence of court error, however, this conclusion may be wrong. Court decisions create positive externalities for future litigants which will not occur if a dispute is settled out of court. Focusing on private litigation, we examine the impact of court error on the deterrent effect of the strict liability rule. In an asymmetric information setup both, underdeterrence and overdeterrence are possible under court error. Moreover, court error increases the likelihood of out-of-court settlements which can offset the positive externality of litigation.

Keywords: litigation; settlement; asymmetric information; court error; strict liability rule (search for similar items in EconPapers)
JEL-codes: K13 K41 (search for similar items in EconPapers)
Date: 2010-02
New Economics Papers: this item is included in nep-cta and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://repec.vwiit.ch/dp/dp1003.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ube:dpvwib:dp1003

Access Statistics for this paper

More papers in Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft Contact information at EDIRC.
Bibliographic data for series maintained by Franz Koelliker ().