Information and Externalities in Sequential Litigation - 10.1628/0932456054193676 - Mohr Siebeck
Economics

Xinyu Hua, Kathryn E. Spier

Information and Externalities in Sequential Litigation

Volume 161 () / Issue 2, pp. 215-232 (18)

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The information created and disseminated through the litigation process can have social value. Suppose a long-lived plaintiff is suing a defendant for damages sustained in an accident. The plaintiff may suffer similar damages in future accidents involving different defendants. Potential injurers update their beliefs after observing the first case and subsequently fine-tune their precautions to avoid accidents. The joint incentive of the plaintiff and the first defendant to create public information through litigation is too small. The optimal liability rule trades off the injurers' incentives to take precautions and the plaintiff's incentive to create public information.
Authors/Editors

Xinyu Hua No current data available.

Kathryn E. Spier No current data available.