Deterrence, Lawsuits, and Litigation Outcomes Under Court Errors

Claudia M. Landeo (), Maxim Nikitin and Scott Baker

Journal of Law, Economics and Organization, 2007, vol. 23, issue 1, pages 57-97

Abstract: This article presents a strategic model of liability and litigation under court errors. Our framework allows for endogenous choice of level of care and endogenous likelihood of filing and disputes. We derive sufficient conditions for a unique universally divine mixed-strategy perfect Bayesian equilibrium under low court errors. In this equilibrium, some defendants choose to be grossly negligent; some cases are filed; and some lawsuits are dropped, some are resolved out of court, and some go to trial. We find that court errors in the size of the award, as well as damage caps and split awards, reduce the likelihood of trial but increase filing and reduce the deterrence effect of punitive damages. We derive conditions under which the adoption of the English rule for allocating legal costs reduces filing. Copyright 2007, Oxford University Press.

Date: 2007

Downloads: (external link)
http://hdl.handle.net/10.1093/jleo/ewm003 (text/html)
Access to full text is restricted to subscribers.

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: http://EconPapers.repec.org/RePEc:oup:jleorg:v:23:y:2007:i:1:p:57-97

Ordering information: This journal article can be ordered from
http://www.oup.co.uk/journals

Access Statistics for this article

Journal of Law, Economics and Organization is edited by Ian Ayres

More articles in Journal of Law, Economics and Organization from Oxford University Press
Address: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
Series data maintained by Christopher F. Baum ().