Class Actions, Compliance and Moral Cost

Deffains Bruno and Dominique Demougin ()
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Deffains Bruno: University of Paris II, EBS University, Wiesbaden

Review of Law & Economics, 2011, vol. 7, issue 2, 481-500

Abstract: We study the effects of introducing class action lawsuits into a competitive environment where some firms have an intrinsic motivation to implement efficient care. The standard aggregation argument in favor of class action holds that there will be increasing efficiency due to lower litigation costs. In the short run, intrinsically motivated firms benefit from the introduction of a class action procedure. In the long run, new intrinsically motivated entrants are attracted into the market, thereby increasing consumer surplus. Overall, the average care level increases.

Date: 2011
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DOI: 10.2202/1555-5879.1540

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