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Louis Kaplow
NBER Working Paper No. 4263 (Also Reprint No. r1850)*
Issued in February 1994
NBER Program(s): LE
---- Abstract -----
Shifting successful plaintiffs' fees to defendants and increasing damage awards are alternative ways to achieve similar results: increasing plaintiffs' incentives to sue and raising defendants' expected payments. This paper shows that relying on higher damage awards is more efficient than shifting plaintiffs' fees. The reason is that fee-shifting is, perversely, more valuable for plaintiffs with higher litigation costs. Thus, it is possible to substitute higher damage awards for fee-shifting in a manner that leaves deterrence unaffected while eliminating the suits of plaintiffs with the highest litigation costs.
*Published: Rand Journal of Economics, vol 24, no. 4, pp. 625-630, (Winter 1993)
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