Information and Externalities in Sequential Litigation

Xiny Hua () and Kathryn E. Spier

No 10943, NBER Working Papers from National Bureau of Economic Research, Inc

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 providing future injurers with incentives to take precautions and providing the plaintiff with incentives to create information.

JEL-codes: D83 K13 K41 (search for similar items in EconPapers)
Date: 2004-12
New Economics Papers: this item is included in nep-law
Note: LE
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Published as Hua, Xinyu and Kathryn E. Spier. “Information and Externalities in Sequential Litigation.” Journal of Institutional and Theoretical Economics 161, 2 (2005): 215-232.

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Journal Article: Information and Externalities in Sequential Litigation (2005)
Working Paper: Information and Externalities in Sequential Litigation
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