Welfare Implications of Costly Litigation Under Strict Liability

Authors

Keith N. Hylton, Boston University School of LawFollow

Author granted license

Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International

Document Type

Article

Publication Date

Spring 2002

ISSN

1465-7260

Publisher

Oxford University Press

Language

en-US

Abstract

This article examines a model of strict liability with costly litigation and presents conditions under which (1) potential injurers take optimal precautions, (2) increasing the cost of litigation enhances precaution and social welfare, (3) the optimal level of liability exceeds the compensatory level, and (4) increasing the rate of settlement enhances social welfare. The results have implications for controversies surrounding fee shifting, optimal damage awards (e.g., punitive damages), and the social desirability of settlement. The most striking implication is that fee shifting in favor of prevailing plaintiffs is socially desirable in low-transaction-cost settings.

Comments

Updated with published version of paper on 9/24/22

Working paper available on SSRN

Recommended Citation

Keith N. Hylton, Welfare Implications of Costly Litigation Under Strict Liability , in 4 American Law and Economics Review 18 (2002).
Available at: https://scholarship.law.bu.edu/faculty_scholarship/790