Working Paper: NBER ID: w23364
Authors: Louis Kaplow
Abstract: In many settings, there are preliminary or interim decision points at which legal cases may be terminated: e.g., motions to dismiss and for summary judgment in U.S. civil litigation, grand jury decisions in criminal cases, and agencies’ screening and other exercises of discretion in pursuing investigations. This article analyzes how the decision whether to continue versus terminate should optimally be made when (A) proceeding to the next stage generates further information but at a cost to both the defendant and the government and (B) the prospect of going forward, and ultimately imposing sanctions, deters harmful acts and also chills desirable behavior. This subject involves a mechanism design analogue to the standard value of information problem, one that proves to be qualitatively different and notably more complex. Numerous factors enter into the optimal decision rule – some expected, some subtle, and some counterintuitive. The optimal rule for initial or intermediate stages is also qualitatively different from that for assigning liability at the final stage of adjudication.
Keywords: No keywords provided
JEL Codes: D81; D82; K14; K41; K42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| expected adjudication costs (AC) (K41) | decision to continue legal proceedings (C) (K41) |
| probability of liability (P) (K13) | decision to continue legal proceedings (C) (K41) |
| decision to continue legal proceedings (C) (K41) | deterrence of harmful acts (D) (K42) |
| decision to continue legal proceedings (C) (K41) | chilling of benign acts (CH) (Y50) |
| probability of liability (P) (K13) | chilling of benign acts (CH) (Y50) |
| decision to continue legal proceedings (C) (K41) | termination of legal proceedings (T) (K41) |
| decision to continue legal proceedings (C) (K41) | future decisions at later stages (D25) |
| evidence and signals at final stage (G41) | final adjudication decisions (K41) |