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Shifting Plaintiffs' Fees versus Increasing Damage Awards

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  • Louis Kaplow

Abstract

Shifting successful plaintiffs' fees to defendants and increasing damage awards are alternative ways to achieve similar results: increasing plaintiffs' incentives to sue and raising defendants' expected payments. This paper shows that relying on higher damage awards is more efficient than shifting plaintiffs' fees. The reason is that fee-shifting is, perversely, more valuable for plaintiffs with higher litigation costs. Thus, it is possible to substitute higher damage awards for fee-shifting in a manner that leaves deterrence unaffected while eliminating the suits of plaintiffs with the highest litigation costs.

Suggested Citation

  • Louis Kaplow, 1993. "Shifting Plaintiffs' Fees versus Increasing Damage Awards," NBER Working Papers 4263, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4263
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    1. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
    2. A. Mitchell Polinsky & Yeon-Koo Che, 1991. "Decoupling Liability: Optimal Incentives for Care and Litigation," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 562-570, Winter.
    3. Katz, Avery, 1987. "Measuring the Demand for Litigation: Is the English Rule Really Cheaper?," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 3(2), pages 143-176, Fall.
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    Cited by:

    1. 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.
    2. Éric Langlais, 2008. "Indemnisation des préjudices et fréquence des procès en présence d'une asymétrie d'information sur l'aversion au risque des parties," Recherches économiques de Louvain, De Boeck Université, vol. 74(2), pages 191-218.
    3. Dari-Mattiacci, Giuseppe & Saraceno, Margherita, 2020. "Fee shifting and accuracy in adjudication," International Review of Law and Economics, Elsevier, vol. 63(C).
    4. McAfee, R. Preston & Mialon, Hugo M. & Mialon, Sue H., 2008. "Private v. public antitrust enforcement: A strategic analysis," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 1863-1875, October.
    5. Beckner, Clinton III & Katz, Avery, 1995. "The incentive effects of litigation fee shifting when legal standards are uncertain," International Review of Law and Economics, Elsevier, vol. 15(2), pages 205-224, June.
    6. Kaplow, Louis, 2017. "Optimal design of private litigation," Journal of Public Economics, Elsevier, vol. 155(C), pages 64-73.
    7. Osborne, Evan, 1999. "Who should be worried about asymmetric information in litigation?," International Review of Law and Economics, Elsevier, vol. 19(3), pages 399-409, September.
    8. Lanjouw, Jenny & Schankerman, Mark, 1998. "Patent Suits: Do They Distort Research Incentives?," CEPR Discussion Papers 2042, C.E.P.R. Discussion Papers.
    9. Jean O. Lanjouw & Mark Schankerman, 1997. "Stylized Facts of Patent Litigation: Value, Scope and Ownership," NBER Working Papers 6297, National Bureau of Economic Research, Inc.
    10. Kathryn Zeiler, "undated". "Medical Malpractice and Contract Disclosure: An Equilibrium Model of the Effects of Legal Rules on Behavior in Health Care Markets," American Law & Economics Association Annual Meetings 1071, American Law & Economics Association.

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    More about this item

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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