TY  - JOUR
AU  - Polinsky,A. Mitchell
AU  - Rubinfeld,Daniel L.
TI  - Optimal Awards and Penalties when the Probability of Prevailing Varies  Among Plaintiffs
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4507
PY  - 1993
Y2  - October 1993
UR  - http://www.nber.org/papers/w4507
L1  - http://www.nber.org/papers/w4507.pdf
N1  - Author contact info:
A. Mitchell Polinsky
Stanford Law School
Stanford University
Stanford, CA  94305
Tel: 650/723-0886
Fax: 650/723-3557
E-Mail: polinsky@stanford.edu

Daniel L. Rubinfeld
Robert L. Bridges Professor of Law and
Professor of Economics Emeritus
788 Simon Tower, Boalt Hall
University of California, Berkeley
Berkeley, CA 94720
Tel: 510/642-1959
Fax: 510/642-3767
E-Mail: drubinfeld@law.berkeley.edu
AB  - This article derives the optimal award to a winning plaintiff and the optimal penalty on a losing plaintiff when the probability of prevailing varies among plaintiffs.  Optimality is defined in terms of achieving a specified degree of deterrence of potential injurers with the lowest litigation cost.  Our main result is that the optimal penalty on a losing plaintiff is positive, in contrast to common practice in the United States.  By penalizing losing plaintiffs and raising the award to winning plaintiffs (relative to what it would be if losing plaintiffs were not penalized), it is possible to discourage relatively low-probability-of-prevailing plaintiffs from suing without discouraging relatively high-probability plaintiffs, and thereby to achieve the desired degee of deterrence with lower litigation costs. This result is developed first in a model in which all suits are assumed to go to trial and then in a model in which settlements are possible.
ER  -