The interaction of emotions and cost-shifting rules in civil litigation

Ben Chen () and José Rodrigues-Neto
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Ben Chen: University of Sydney

Economic Theory, 2023, vol. 75, issue 3, No 8, 885 pages

Abstract: Abstract We model civil litigation as a simultaneous contest between a plaintiff and a defendant who have monetary and emotional preferences. The litigants’ emotional variables capture a non-monetary joy of winning and relational emotions toward each other. A contest success function (CSF) describes the litigants’ respective probabilities of success based on their endogenous litigation expenses and exogenous relative advantages. The model does not specify a functional form for the CSF. Instead, it accommodates any CSF that satisfies general and intuitive assumptions, which capture frequently-used functional forms. A cost-shifting rule allows the winner to recover an exogenous proportion of her litigation expenses from the loser. There exists a unique Nash equilibrium with positive expenses. In equilibrium, negative relational emotions (but not a positive joy of winning) amplify the effects of cost shifting, and vice versa. Thus negative relational emotions and positive cost shifting have a similar strategic role, and one can be a substitute for the other. If the litigants’ relative advantages are sufficiently balanced, then more cost shifting (or more negative relational emotions) increases total expenses in equilibrium.

Keywords: Cost shifting; Emotions; Interdependent preferences; Litigation; Contest (search for similar items in EconPapers)
JEL-codes: C72 D91 K41 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s00199-022-01426-4

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