Working Paper: NBER ID: w9697
Authors: Steven Shavell
Abstract: This paper contains the chapters on litigation and the legal process from a general, forthcoming book, Foundations of Economic Analysis of Law (Harvard University Press, 2003). In chapter 17, I consider the basic theory of litigation. Here I describe the three phases of litigation: its initiation through suit, the determination of whether the parties will settle their case or proceed to trial, and, if trial results, the trial expenditures. I also analyze the social desirability of their decisions, a major theme being that the private incentives to litigate may diverge from what is socially desirable. In chapter 18, I extend the basic theory of litigation, examining among other issues the bringing of negative value suits, shifting of legal fees to losers at trial, lawyer-client fee arrangements, and the influence of insurers on litigation. Then, in chapter 19, I discuss several general aspects of the legal process not considered in the basic theory and its extensions, including private systems of adjudication, the value of accuracy in adjudication, the appeals process, and the function of legal advice.
Keywords: No keywords provided
JEL Codes: D00; D6; D8; K00; K4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lower costs (D61) | likelihood of litigation (K41) |
| higher expected benefits (J32) | likelihood of litigation (K41) |
| private incentives to sue (K41) | excessive litigation (K41) |
| expected private gain from litigation is low (K41) | refrain from suing (K41) |
| private incentives to sue (K41) | misalignment with social costs (D61) |
| socially excessive litigation (K41) | divergence from social optimum (D59) |