Costly litigation and optimal damages

A. Mitchell Polinsky () and Steven Shavell

International Review of Law and Economics, 2014, vol. 37, issue C, 86-89

Abstract: A basic principle of law is that damages paid by a liable party should equal the harm caused by that party. However, this principle is not correct when account is taken of litigation costs, because they too are part of the social costs associated with an injury. In this article we examine the influence of litigation costs on the optimal level of damages, assuming that litigation costs rise with the level of damages. Due to this consideration, we demonstrate that optimal damages can lie anywhere between zero and the harm plus the victim's litigation costs.

Keywords: Litigation costs; Optimal damages (search for similar items in EconPapers)
JEL-codes: K13 K41 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0144818813000422
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Costly Litigation and Optimal Damages (2012)
Working Paper: Costly Litigation and Optimal Damages (2012)
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:eee:irlaec:v:37:y:2014:i:c:p:86-89

DOI: 10.1016/j.irle.2013.05.002

Access Statistics for this article

International Review of Law and Economics is currently edited by C. Ott, A. W. Katz and H-B. Schäfer

More articles in International Review of Law and Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().