 Should Plaintiffs Win What Defendants Lose?: Litigation Stakes, Litigation Effort, and the Benefits of 'Decoupling'Albert Choi and
Chris Sanchirico
Scholarship at Penn Law from University of Pennsylvania Law School Abstract: Professors Polinsky and Che advocate "decoupling" what plaintiffs recover from what defendants pay in damages, specifically arguing that lowering recovery and raising damages (by appropriate amounts) delivers the same level of primary activity deterrence with fewer filed suits. Professors Kahan and Tuckman extend Polinsky and Che's analysis to account for the effect of parties' litigation stakes on the cost of each filed suit, provisionally concluding that Polinsky and Che's basic argument remains intact. This article reaches a different conclusion. We show that when the effect of litigation stakes on litigation effort is more fully taken into account, lowering recovery and raising damages may no longer improve social welfare. In addition, we characterize the kinds of suits in which the optimal level of recovery is no less than the optimal level of damages. Of rhetorical significance in the current policy debate, we find that such suits resemble the negative picture of modern litigation invoked by some advocates of reduced recovery. Our basic findings are robust to the possibility of out-of-court settlement, plaintiffs' employment of contingent fee lawyers, and alternative fee-shifting rules. New Economics Papers: this item is included in nep-law Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bep:upennl:upenn_wps-1000 Access Statistics for this paper More papers in Scholarship at Penn Law from University of Pennsylvania Law School |
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