Libel Bullies, Defamation Victims and Litigation Incentives

We analyse the relationship between a public figure's incentives to sue for defamation, and her incentives to do wrong in the first place and the media's incentives to expose this wrongdoing. If evidence on wrongdoing is noisy, a journalist's decision of whether to publish a story based on this evidence is largely driven by his anticipation of the public figure's litigation decision, rather than by the question of whether the evidence is actually correct. In a repeated setting, this induces a public figure to bring negative-value defamation suits in order to appear litigious to journalists in the future. As a consequence, the public figure's incentives to sue for defamation will not only depend on her own direct costs and benefits of doing so, but also on journalists' costs and benefits from litigation and publications. This result makes the case for also taking these latter factors into account in the debate on potential legal reform aiming at litigation incentives.