Costly Litigation and Optimal Damages
NBER Working Paper No. 18594
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.
Document Object Identifier (DOI): 10.3386/w18594
Published: International Review of Law and Economics Volume 37, March 2014, Pages 86–89 Cover image Costly litigation and optimal damages A. Mitchell Polinskya, 1, Steven Shavellb, 1, citation courtesy of
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