Working Paper: NBER ID: w0741
Authors: Steven Shavell
Abstract: The question is asked how the incentives of private parties to bring suit relate to what would be socially appropriate given the costs of using the legal system; and the answer presented in the model that is examined involves two elements. The first is that as a potential plaintiff takes into account only his own legal expenses in deciding whether to bring suit, the private cost of suit is evidently less than the social cost (which would include the defendant's legal expenses), suggesting a tendency toward excessive litigation, other things equal. But consideration of the second element complicates matters: as the plaintiff takes into account his own expected gains but not the social gains attaching to suit (which in the model is the general effect of suit on potential defendants' behavior), and as these social gains could be either larger or smaller than his gains, there is a tendency in respect to litigation that could either counter or reinforce the previous tendency.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| private cost of bringing suit (K41) | social cost (D61) |
| private cost of bringing suit (K41) | excessive litigation (K41) |
| social cost (D61) | excessive litigation (K41) |
| private benefit of a suit (D14) | social benefit (H43) |
| private benefit of a suit (D14) | excessive litigation (K41) |
| social benefit (H43) | excessive litigation (K41) |
| expected social costs (H43) | social desirability of litigation (K41) |
| expected social benefits (H43) | social desirability of litigation (K41) |