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Should Tort Damages Be Multiplied?

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  • Keith N. Hylton

    (Boston University)

  • Thomas J. Miceli

    (University of Connecticut)

Abstract

The notion that damages should be multiplied by the reciprocal of the probability of punishment has been around since Bentham and is one of the basic lessons of the law and economics literature. However, the simple 'p' multiplier turns out be inapplicable in the civil damages setting. The multiplier that brings about first-best deterrence must be chosen by striking a balance between the supply of lawsuits and the need to internalize costs. Moreover, given the costs of litigation, a multiplier that minimizes overall social costs (in contrast to achieving first-best deterrence) may need to be set at a level that effectively bars many claims. This paper derives optimal damage multipliers for a costly civil litigation system and examines the conflicting implications of deterrence and social cost minimization as objectives in the design of an optimal multiplier. An empirical application suggests that the first-best deterrence multiplier for the tort system is roughly equal to two.

Suggested Citation

  • Keith N. Hylton & Thomas J. Miceli, 2002. "Should Tort Damages Be Multiplied?," Working papers 2002-45, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:2002-45
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    Cited by:

    1. Robert Cooter & Ariel Porat, 2015. "Disgorgement Damages for Accidents," The Journal of Legal Studies, University of Chicago Press, vol. 44(2), pages 249-276.
    2. Florian Baumann & Tim Friehe, 2015. "Optimal Damages Multipliers in Oligopolistic Markets," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 171(4), pages 622-640, December.
    3. De Mot, Jef & Depoorter, Ben, 2010. "Tort law and probabilistic litigation: How to apply multipliers to address the problem of negative value suits," International Review of Law and Economics, Elsevier, vol. 30(3), pages 236-243, September.
    4. Ian A. MacKenzie, 2014. "Precaution with endogenous litigation choices," Discussion Papers Series 535, School of Economics, University of Queensland, Australia.

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