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Judge's Gate-Keeping Power and Deterrence of Negligent Acts: An Economic Analysis of Twombly and Iqbal

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  • Kim, Chulyoung

Abstract

Following its landmark decisions in Bell Atlantic v. Twombly and Ashcroft v. Iqbal, the Supreme Court allows federal judges to dismiss cases when the plaintiff's allegations are conclusory or implausible, thereby increasing the judges' discretionary power in pleading stages of litigation. Using a stylized litigation model, I find the conditions under which the ruling improves upon litigation outcomes by simultaneously raising deterrence and reducing litigation costs and error costs. In particular, I demonstrate the ways in which the ruling's effect depends on the correlation between the potential injurers' primary behavior and the strength of cases filed at trial courts.

Suggested Citation

  • Kim, Chulyoung, 2015. "Judge's Gate-Keeping Power and Deterrence of Negligent Acts: An Economic Analysis of Twombly and Iqbal," MPRA Paper 69836, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:69836
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    References listed on IDEAS

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    1. Demougin, Dominique & Fluet, Claude, 2006. "Preponderance of evidence," European Economic Review, Elsevier, vol. 50(4), pages 963-976, May.
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    4. Polinsky, A Mitchell, 1980. "Strict Liability vs. Negligence in a Market Setting," American Economic Review, American Economic Association, vol. 70(2), pages 363-367, May.
    5. 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.
    6. Rosenberg, David & Shavell, Steven, 2006. "A solution to the problem of nuisance suits: The option to have the court bar settlement," International Review of Law and Economics, Elsevier, vol. 26(1), pages 42-51, March.
    7. Kaplow, Louis, 1994. "The Value of Accuracy in Adjudication: An Economic Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 307-401, January.
    8. Michael P. Stone & Thomas J. Miceli, 2013. "The Impact of Frivolous Lawsuits on Deterrence: Do They Have Some Redeeming Value?," Working papers 2013-26, University of Connecticut, Department of Economics.
    9. Chris William Sanchirico (ed.), 2012. "Procedural Law and Economics," Books, Edward Elgar Publishing, number 13092.
    10. William H. J. Hubbard, 2013. "Testing for Change in Procedural Standards, with Application to Bell Atlantic v. Twombly," The Journal of Legal Studies, University of Chicago Press, vol. 42(1), pages 35-68.
    11. Louis Kaplow, 2011. "On the Optimal Burden of Proof," Journal of Political Economy, University of Chicago Press, vol. 119(6), pages 1104-1140.
    12. Nicola Persico, 2002. "Racial Profiling, Fairness, and Effectiveness of Policing," American Economic Review, American Economic Association, vol. 92(5), pages 1472-1497, December.
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    Cited by:

    1. Alain Marciano & Giovanni Ramello & Hans-Bernd Schaefer, 2020. "Foreword, special issue: economic analysis of litigations 2," European Journal of Law and Economics, Springer, vol. 50(1), pages 1-5, August.

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    More about this item

    Keywords

    Twombly; Iqbal; deterrence; litigation costs; error costs; perfect Bayesian equilibrium;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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