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Does the English Rule Discourage Low-Probability-of-Prevailing Plaintiffs?

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  • Polinsky, A Mitchell
  • Rubinfeld, Daniel L

Abstract

One of the principal results in the economic theory of litigation is that the English rule of fee allocation (in which the loser pays the winner's litigation costs) is better at discouraging suits by low-probability-of-prevailing plaintiffs than the American rule (in which each side bears its own costs). This result has been demonstrated under the assumption that all suits that are filed go to trial. Using a standard asymmetric-information model of litigation, we show that when the settlement process is taken into account the English rule results in more low-probability-of-prevailing plaintiffs going to trial than the American rule. In this sense, the English rule encourages low-probability plaintiffs more than the American rule. Copyright 1998 by the University of Chicago.

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  • Polinsky, A Mitchell & Rubinfeld, Daniel L, 1998. "Does the English Rule Discourage Low-Probability-of-Prevailing Plaintiffs?," The Journal of Legal Studies, University of Chicago Press, vol. 27(1), pages 141-157, January.
    • Handle: RePEc:ucp:jlstud:v:27:y:1998:i:1:p:141-57
    DOI: 10.1086/468016
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    Cited by:

    1. Garoupa, Nuno, 1999. "The economics of political dishonesty and defamation," International Review of Law and Economics, Elsevier, vol. 19(2), pages 167-180, June.
    2. Alex Esteller-More, "undated". "Optimal user charges on judicial ligitation. An analysis for the Spanish case," Studies on the Spanish Economy 67, FEDEA.
    3. Baptiste Massenot & Maria Maraki & Christian Thoeni, 2016. "Legal compliance and litigation spending under the English and American rule: Experimental evidence," Cahiers de Recherches Economiques du Département d'économie 16.19, Université de Lausanne, Faculté des HEC, Département d’économie.
    4. Michael R. Baye & Dan Kovenock & Casper G. Vries, 2005. "Comparative Analysis of Litigation Systems: An Auction-Theoretic Approach," Economic Journal, Royal Economic Society, vol. 115(505), pages 583-601, July.
    5. Doménech-Pascual, Gabriel & Martínez-Matute, Marta & Mora-Sanguinetti, Juan S., 2021. "Do fee-shifting rules affect plaintiffs’ win rates? A theoretical and empirical analysis," International Review of Law and Economics, Elsevier, vol. 65(C).
    6. Christian Schwab & Hin-Yue Tang & Stefan Winter, 2014. "Free choice of legal fee shifting rules?," European Journal of Law and Economics, Springer, vol. 37(2), pages 299-324, April.
    7. Echazu, Luciana & Garoupa, Nuno, 2012. "Why not adopt a loser-pays-all rule in criminal litigation?," International Review of Law and Economics, Elsevier, vol. 32(2), pages 233-241.
    8. Ben Chen & José A. Rodrigues-Neto, 2023. "The interaction of emotions and cost-shifting rules in civil litigation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(3), pages 841-885, April.
    9. Ottoz Elisabetta & Cugno Franco, 2012. "Different Rules of Legal-Cost Allocation and Patent Hold-Up," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201216, University of Turin.
    10. Ben Chen & Jose A. Rodrigues Neto, 2017. "Emotions in Civil Litigation," ANU Working Papers in Economics and Econometrics 2017-653, Australian National University, College of Business and Economics, School of Economics.
    11. Schwab, Christian & Tang, Hin-Yue Benny, 2011. "Die Steuerungswirkungen unterschiedlicher Prozesskostenregelungen: Ein Überblick zum Stand von Theorie und Empirie [The economic effects of alternative fee shifting rules: A review of the theoretic," MPRA Paper 32746, University Library of Munich, Germany.
    12. Elisabetta Ottoz & Franco Cugno, 2015. "Different Rules of Legal-Cost Allocation and Patent Holdup," Research in Law and Economics, in: Economic and Legal Issues in Competition, Intellectual Property, Bankruptcy, and the Cost of Raising Children, volume 27, pages 143-159, Emerald Group Publishing Limited.

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