Optimal Awards and Penalties When the Probability of Prevailing Varies Among Plaintiffs

16 Pages Posted: 4 Apr 2002 Last revised: 27 Oct 2022

See all articles by A. Mitchell Polinsky

A. Mitchell Polinsky

Stanford Law School; National Bureau of Economic Research (NBER)

Daniel L. Rubinfeld

University of California at Berkeley - School of Law; National Bureau of Economic Research (NBER); NYU Law School

Multiple version iconThere are 3 versions of this paper

Date Written: October 1993

Abstract

This article derives the optimal award to a winning plaintiff and the optimal penalty on a losing plaintiff when the probability of prevailing varies among plaintiffs. Optimality is defined in terms of achieving a specified degree of deterrence of potential injurers with the lowest litigation cost. Our main result is that the optimal penalty on a losing plaintiff is positive, in contrast to common practice in the United States. By penalizing losing plaintiffs and raising the award to winning plaintiffs (relative to what it would be if losing plaintiffs were not penalized), it is possible to discourage relatively low-probability-of-prevailing plaintiffs from suing without discouraging relatively high-probability plaintiffs, and thereby to achieve the desired degee of deterrence with lower litigation costs. This result is developed first in a model in which all suits are assumed to go to trial and then in a model in which settlements are possible.

Suggested Citation

Polinsky, A. Mitchell and Rubinfeld, Daniel L., Optimal Awards and Penalties When the Probability of Prevailing Varies Among Plaintiffs (October 1993). NBER Working Paper No. w4507, Available at SSRN: https://ssrn.com/abstract=305597

A. Mitchell Polinsky (Contact Author)

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-723-0886 (Phone)
650-723-3557 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Daniel L. Rubinfeld

University of California at Berkeley - School of Law ( email )

215 Boalt Hall
Berkeley, CA 94720-7200
United States
(510) 642-1959 (Phone)
(510) 642-3767 (Fax)

HOME PAGE: http://www.law.berkeley.edu/faculty/rubinfeldd

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

NYU Law School ( email )

44 West Fourth Street, Suite 9-53
New York, NY 10012-1126
United States
(212) 992 8834 (Phone)