Working Paper: NBER ID: w18594
Authors: A. Mitchell Polinsky; Steven Shavell
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.
Keywords: No keywords provided
JEL Codes: K13; K41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| litigation costs (K41) | optimal damages (K13) |
| optimal damages (K13) | social costs (J32) |
| damages (K13) | litigation costs (K41) |
| optimal damages < harm + litigation costs (K13) | litigation costs (K41) |
| litigation costs fixed (K41) | optimal damages = 0 or harm + fixed litigation costs (K13) |
| variable litigation costs (K41) | optimal damages < harm + litigation costs (K13) |
| litigation costs (K41) | decision to sue (K41) |