Costly Litigation and Optimal Damages

A. Mitchell Polinsky () and Steven Shavell ()
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Steven Shavell: Harvard Law School

No 12-005, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: A basic principle of law is that damages paid by a liable party should equal the harm caused by that party. However, this principle is not correct when account is taken of litigation costs, because they too are part of the social costs associated with an injury. In this article we examine the influence of litigation costs on the optimal level of damages, assuming that litigation costs rise with the level of damages.

JEL-codes: K13 K41 (search for similar items in EconPapers)
Date: 2012-12
New Economics Papers: this item is included in nep-law
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Related works:
Journal Article: Costly litigation and optimal damages (2014)
Working Paper: Costly Litigation and Optimal Damages (2012)
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