Should Plaintiffs Win What Defendants Lose? Litigation Stakes, Litigation Effort, and the Benefits of Decoupling

Chris William Sanchirico () and Albert Choi
Additional contact information
Albert Choi: University of Virginia Economics Department

Law and Economics from EconWPA

Abstract: Professors Polinsky and Che advocate “decoupling” what plaintiffs recover from what defendants pay in damages. They specifically argue that lowering recovery and raising damages can deliver the same level of deterrence with fewer filed suits. Professors Kahan and Tuckman extend Polinsky and Che’s analysis to account for the fact that parties’ will alter their litigation effort in response to changes in litigation stakes. But Kahan and Tuckman provisionally conclude that modeling litigation effort does not alter Polinsky and Che’s basic argument. This article reaches a different conclusion. We show that when litigation effort is added to the picture, Polinsky and Che’s proposal to lower recovery and raise damages may no longer improve social welfare. We then characterize the kinds of suits in which setting recovery below damages is sub-optimal. Of rhetorical significance for the current policy debate, we find that such suits share many of the empirical premises about litigation that ground conventional arguments in favor of making recovery less than damages. In particular, recovery should be no less than damages in large suits with deep pocket defendants. Our findings are robust to the possibility of out-of-court settlement, plaintiffs’ employment of contingent fee lawyers, and alternative fee-shifting rules.

Keywords: Procedure; Law and Economics; Punitive Damages; Decoupling; Contingent Fees (search for similar items in EconPapers)
JEL-codes: C7 D8 D6 D7 H (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-law
Date: 2004-03-30
Note: Type of Document - pdf; pages: 30. Companion paper: 'Environmental Self-Auditing: Setting the Proper Incentives for Discovery and Correction of Environmental Harm,' The Journal of Law, Economics, & Organization, 16(1), 189 - 208 (2000)
View citations in EconPapers

Downloads: (external link)
http://129.3.20.41/eps/le/papers/0403/0403006.pdf (application/pdf)

Related works:
Working Paper: Should Plaintiffs Win What Defendants Lose?: Litigation Stakes, Litigation Effort, and the Benefits of 'Decoupling'
Journal Article: Should Plaintiffs Win What Defendants Lose? Litigation Stakes, Litigation Effort, and the Benefits of Decoupling (2004)
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:wpa:wuwple:0403006

Access Statistics for this paper

More papers in Law and Economics from EconWPA
Series data maintained by EconWPA ().