Welfare Implications of Costly Litigation under Strict Liability

This article examines a model of strict liability with costlylitigation and presents conditions under which (1) potentialinjurers take optimal precautions, (2) increasing the cost oflitigation enhances precaution and social welfare, (3) the optimallevel of liability exceeds the compensatory level, and (4) increasingthe rate of settlement enhances social welfare. The resultshave implications for controversies surrounding fee shifting,optimal damage awards (e.g., punitive damages), and the socialdesirability of settlement. The most striking implication isthat fee shifting in favor of prevailing plaintiffs is sociallydesirable in low-transaction-cost settings.     

Injunctive and reverse settlements in competition-blocking litigation

We distinguish standard settlements, in which the status quo is preserved, and injunctive settlements, which prohibit the defendant’s activity. The reverse (payment) settlement is a special type of injunctive settlement. We examine the divergence between private and social incentives to settle and policies that would minimize socially undesirable injunctive and reverse settlements (e.g., banning reverse settlements). The results are applied to competition-blocking litigation, such as patent infringement and antidumping.     

Information, Litigation, and Common Law Evolution

It is common in the legal academy to describe judicial decisiontrends leading to new common law rules as resulting from consciousjudicial effort. Evolutionary models of litigation, in contrast,treat common law as resulting from pressure applied by litigants.One apparent difficulty in the theory of litigation is explaininghow trends in judicial decisions favoring one litigant, andbiasing the legal standard, could occur. This article presentsa model in which an apparent bias in the legal standard canoccur in the absence of any effort toward this end on the partof judges. Trends can develop favoring the better-informed litigantwhose case is also meritorious. Although the model does notsuggest an unambiguous trend toward efficient legal rules, itdoes show how private information from litigants becomes embodiedin common law, an important part of the theory of efficientlegal rules.     

The law and economics of organ procurement

This paper presents an economic analysis of the organ procurement system in the U.S. and examines proposals to alleviate the shortage of transplantable organs. The paper's principal conclusions are: (1) Although non-market solutions deserve the highest priority, demand increases fueled by improvements in transplant technology will probably make some market-based solution necessary in the future. (2) Quality deterioration and coercion will not necessarily be worrisome problems under a market-based procurement system.