An Integrated Theory of Litigation and Legal Standards

Álvaro Bustos and Nuno Garoupa

No 536, Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile.

Abstract: I propose an integrated understanding of litigation and legal standards that allows us to answer key questions in the functioning of common law legal systems: When do substantive trials occur?; does society face too many or too few of these trials?; and can legal standards be used to correct a potentially inefficient frequency of litigation? I characterize the dynamics of substantive trials and predict their occurrence on an infinite horizon. I show, for three reasons, that private and socially optimal litigation frequencies are not equal, identifying corrections. I also derive state contingent and non-contingent optimal standards, and discuss policy implications.

Date: 2020
New Economics Papers: this item is included in nep-law
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Persistent link: https://EconPapers.repec.org/RePEc:ioe:doctra:536

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