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Split-Award Tort Reform, Firm's Level of Care, and Litigation Outcomes

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  • Claudia M. Landeo
  • Maxim Nikitin

Abstract

We investigate the effect of the split-award tort reform, where the state takes a share of the plaintiff's punitive damage award, on the firm's level of care, the likelihood of trial, and the social costs of accidents. A decrease in the plaintiff's share of the punitive damage award reduces the firm's level of care and therefore increases the probability of accidents. The effects of split awards on the likelihood of trial and social costs of accidents are ambiguous. Conditions under which a decrease in the plaintiff's share of the punitive damage award reduces the probability of trial and the social cost of accidents are derived.

Suggested Citation

  • Claudia M. Landeo & Maxim Nikitin, 2006. "Split-Award Tort Reform, Firm's Level of Care, and Litigation Outcomes," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(4), pages 571-600, December.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200612)162:4_571:strflo_2.0.tx_2-v
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    Cited by:

    1. Friehe, Tim & Pham, Cat Lam, 2021. "Accident avoidance and settlement bargaining: The role of reciprocity," International Review of Law and Economics, Elsevier, vol. 68(C).
    2. Chopard, Bertrand & Cortade, Thomas & Langlais, Eric, 2010. "Trial and settlement negotiations between asymmetrically skilled parties," International Review of Law and Economics, Elsevier, vol. 30(1), pages 18-27, March.
    3. Landeo, Claudia M., 2009. "Cognitive coherence and tort reform," Journal of Economic Psychology, Elsevier, vol. 30(6), pages 898-912, December.
    4. Landeo, Claudia M. & Nikitin, Maxim, 2018. "Financially-constrained lawyers: An economic theory of legal disputes," Games and Economic Behavior, Elsevier, vol. 109(C), pages 625-647.
    5. Felix Höffler & Stefan Bechthold, 2008. "An economic analysis of tradesecret protection in buyer-seller relationships," WHU Working Paper Series - Economics Group 08-04, WHU - Otto Beisheim School of Management.
    6. Landeo, Claudia M., 2009. "Tort Reform, Disputes and Belief Formation," MPRA Paper 13453, University Library of Munich, Germany.
    7. Landeo, Claudia & Nikitin, Maxim & Izmalkov, Sergei, 2012. "Playing against an Apparent Opponent: Incentives for Care, Litigation, and Damage Caps under Self-Serving Bias," Working Papers 2012-15, University of Alberta, Department of Economics, revised 01 Oct 2012.
    8. Landeo, Claudia M. & Nikitin, Maxim & Babcock, Linda, 2007. "Split-awards and disputes: An experimental study of a strategic model of litigation," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 553-572, July.
    9. Claudia M. Landeo, 2018. "Law and economics and tort litigation institutions: theory and experiments," Chapters, in: Joshua C. Teitelbaum & Kathryn Zeiler (ed.), Research Handbook on Behavioral Law and Economics, chapter 9, pages 247-268, Edward Elgar Publishing.
    10. Nuno Garoupa & Chris William Sanchirico, 2010. "Decoupling as Transactions Tax," The Journal of Legal Studies, University of Chicago Press, vol. 39(2), pages 469-496.

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    More about this item

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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