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Deterrence effects under Twombly: On the costs of increasing pleading standards in litigation

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  • Campos, Sergio J.
  • Cotton, Christopher S.
  • Li, Cheng

Abstract

We develop a game theoretic model of litigant behavior to study the effects of increased pleading standards on incentives to engage in illegal activity. Such a model is necessary to build intuition about the potential costs of the procedures set forth by the U.S. Supreme Court in Bell Atlantic Corp. v. Twombly (550 U.S. 544 [2007]) and Ashcroft v. Iqbal (556 U.S. 662, 684 [2009]), which increase the standard of plausibility that lawsuits must meet before being allowed to proceed to discovery and trial. We show how increasing pleading standards tends to increase illegal activity, and can increase litigation costs. Our results provide a counterpoint to the U.S. Supreme Court's argument that increased plausibility requirements decrease the costs of litigation.

Suggested Citation

  • Campos, Sergio J. & Cotton, Christopher S. & Li, Cheng, 2015. "Deterrence effects under Twombly: On the costs of increasing pleading standards in litigation," International Review of Law and Economics, Elsevier, vol. 44(C), pages 61-71.
    • Handle: RePEc:eee:irlaec:v:44:y:2015:i:c:p:61-71
    DOI: 10.1016/j.irle.2015.08.005
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    Cited by:

    1. Andreea Cosnita-Langlais & Jean-Philippe Tropeano, 2018. "How procedures shape substance: institutional design and antitrust evidentiary standards," European Journal of Law and Economics, Springer, vol. 46(1), pages 143-164, August.
    2. Chulyoung Kim, 2018. "Judge’s gate-keeping power and deterrence of negligent acts: an economic analysis of Twombly and Iqbal," European Journal of Law and Economics, Springer, vol. 46(1), pages 39-66, August.

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    More about this item

    Keywords

    Judicial procedure; Pleading; Litigation; Deterrence; Litigation costs; Tort law;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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