Tort Reform, Disputes and Belief Formation

Claudia Landeo

No 2009-12, Working Papers from University of Alberta, Department of Economics

Abstract: We experimentally study the effects of the split-award tort reform, where the state takes a share of the plaintiff's punitive damage award, on litigants' beliefs and bargaining outcomes. In addition, we study the formation of litigants' beliefs in a strategic environment. Our results provide support for coherence-based reasoning theories: coherence shifts in litigants' background beliefs (elicited before a role is assigned and after commitment to a choice at the pretrial bargaining stage) suggest bi-directionality between choices and beliefs. Our findings also suggest role-specific bias in the updating of plaintiffs' beliefs about firm's negligence. Finally, our findings indicate that split-awards affect plaintiffs' beliefs about fairness and lower out-of-court settlement amounts.

Keywords: Tort Reform; Belief Formation; Split-Award Statute; Coherence-Based-Reasoning; Role-Specific Bias; Self-Serving Bias; Motivated Reasoning; Settlement; Litigation; Experiments; Debiasing through Law (search for similar items in EconPapers)
JEL-codes: A12 C90 D83 K41 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2009-02-14
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Working Paper: Tort Reform, Disputes and Belief Formation (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2009_012

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