A Note on Optimal Public Enforcement with Settlements and Litigation Costs

A. Mitchell Polinsky () and Daniel L. Rubinfeld

No 2114, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This note reexamines the theory of optimal public enforcement when litigation costs are incurred if the defendant is prosecuted at trial, and when an out-of-court settlement is possible. Using a numerical example, it is shown that settlements and litigation costs can substantially alter the optimal system of public enforcement. It is also shown that failing to take these considerations into account can significantly lower the achievable level of social welfare.

Date: 1986-12
Note: LE
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Published as Research in Law and Economics, vol. 12, pp. 1-8, 1989.

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