Keith N. Hylton & Thomas J. Miceli

Boston University School of Law Working Paper 02-05


The notion that damages should be multiplied by the reciprocal of the probability of punishment has been around since Bentham and is one of the basic lessons of the law and economics literature. However, the simple “1/p” multiplier turns out be inapplicable in the civil damages setting. The multiplier that brings about first-best deterrence must be chosen by striking a balance between the supply of lawsuits and the need to internalize costs. Moreover, given the costs of litigation, a multiplier that minimizes overall social costs (in contrast to achieving first-best deterrence) may need to be set at a level that effectively bars many claims. This paper derives optimal damage multipliers for a costly civil litigation system and examines the conflicting implications of deterrence and social cost minimization as objectives in the design of an optimal multiplier. An empirical application suggests that the first-best deterrence multiplier for the tort system is roughly equal to two.

Size: 588KB
Est. download time @ 28.8K: 20 seconds

Adobe Acrobat Reader v3.01 or greater is required to view this paper.
To obtain a free copy, click the button below

Keith N. Hylton Contact Information
Boston University School of Law
765 Commonwealth Ave
Boston, MA 02215
(617) 353-8959

Thomas J. Miceli Contact Information
Department of Economics
341 Mansfield Road
The University of Connecticut
Storrs, CT 06269-1063

The Social Science Research Network Electronic Paper Collection:

Presentation and Publication Information:

To be announced.

Click here to close this window.