A Note on Optimal Public Enforcement with Settlements and Litigation Costs

14 Pages Posted: 27 Dec 2006 Last revised: 13 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

Date Written: December 1986

Abstract

This note reexamines the theory of optimal public enforcement when litigation costs are incurred if the defendant is prosecuted at trial, and when an out-of-court settlement is possible. Using a numerical example, it is shown that settlements and litigation costs can substantially alter the optimal system of public enforcement. It is also shown that failing to take these considerations into account can significantly lower the achievable level of social welfare.

Suggested Citation

Polinsky, A. Mitchell and Rubinfeld, Daniel L., A Note on Optimal Public Enforcement with Settlements and Litigation Costs (December 1986). NBER Working Paper No. w2114, Available at SSRN: https://ssrn.com/abstract=344874

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Daniel L. Rubinfeld

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