Information and Externalities in Sequential Litigation

Xiny Hua () and Kathryn E. Spier

Journal of Institutional and Theoretical Economics (JITE), 2005, vol. 161, issue 2, 215-232

Abstract: The information created and disseminated through the litigation process can have social value. Suppose a long-lived plaintiff is suing a defendant for damages sustained in an accident. The plaintiff may suffer similar damages in future accidents involving different defendants. Potential injurers update their beliefs after observing the first case and subsequently fine-tune their precautions to avoid accidents. The joint incentive of the plaintiff and the first defendant to create public information through litigation is too small. The optimal liability rule trades off the injurers' incentives to take precautions and the plaintiff's incentive to create public information.

JEL-codes: D8 K1 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Information and Externalities in Sequential Litigation (2004)
Working Paper: Information and Externalities in Sequential Litigation
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