NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Incentives to Settle Under Joint and Several Liability

Howard F. Chang, Hilary Sigman

NBER Working Paper No. 7096
Issued in April 1999
NBER Program(s):   PE

Congress may soon restrict joint and several liability for cleanup of contaminated sites under Superfund. We explore whether this change would discourage settlements and is therefore likely to increase the program's already high litigation costs. Recent theoretical research by Kornhauser and Revesz finds that joint and several liability may either encourage or discourage settlement, depending upon the correlation of outcomes at trial across defendants. We extend their two-defendant model to a richer framework with N defendants. This extension allows us to test the theoretical model empirically using data on Superfund litigation. We find that joint and several liability does not discourage settlements and may even encourage them. Our results support the model's predictions about the effects of several variables, such as the degree of correlation in trial outcomes.

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Document Object Identifier (DOI): 10.3386/w7096

Published: Journal of Legal Studies, Vol. 29, no. 1 (January 2000): 205-236.

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