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On the consideration of potential harm in the award of punitive damages

Author

Listed:
  • Bharat Bhole

    (Rochester Institute of Technology)

  • Jeffrey Wagner

    (Rochester Institute of Technology)

Abstract

Multiple empirical studies find that juries/courts take account of potential harm in the determination of punitive damages. The received view in economic theory, however, is that punitive damages should not depend on potential harm. The purpose of this note is to provide an efficiency rationale for the courts'' behavior. Our particular result is that when the punitive damage multiplier decreases as the actual harm increases, the optimal multiplier does depend on the potential harm.

Suggested Citation

  • Bharat Bhole & Jeffrey Wagner, 2009. "On the consideration of potential harm in the award of punitive damages," Economics Bulletin, AccessEcon, vol. 29(2), pages 1102-1106.
    • Handle: RePEc:ebl:ecbull:eb-09-00011
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    File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I2-P57.pdf
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    More about this item

    Keywords

    Compensatory damages; potential harm; punitive damages;
    All these keywords.

    JEL classification:

    • K1 - Law and Economics - - Basic Areas of Law
    • K3 - Law and Economics - - Other Substantive Areas of Law

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