Litigation and Settlement under Court Error
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BORIS DOI
Date of Publication
February 2010
Publication Type
Working Paper
Division/Institute
Subject(s)
Publisher
Department of Economics
Language
English
Description
Settlements are often considered to be welfare-enhancing because they save time and litigation costs. In the presence of court error, however, this conclusion may be wrong. Court decisions create positive externalities for future litigants which will not occur if a dispute
is settled out of court. Focusing on private litigation, we examine the impact of court error on the deterrent effect of the strict liability rule. In an asymmetric information setup both, underdeterrence and overdeterrence are possible under court error. Moreover, court error
increases the likelihood of out-of-court settlements which can offset the positive externality of litigation.
is settled out of court. Focusing on private litigation, we examine the impact of court error on the deterrent effect of the strict liability rule. In an asymmetric information setup both, underdeterrence and overdeterrence are possible under court error. Moreover, court error
increases the likelihood of out-of-court settlements which can offset the positive externality of litigation.
File(s)
File | File Type | Format | Size | License | Publisher/Copright statement | Content | |
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dp1003.pdf | text | Adobe PDF | 198.18 KB | Attribution (CC BY 4.0) | published |