Tort Reform, Disputes and Belief Formation

Landeo, Claudia M. (2009): Tort Reform, Disputes and Belief Formation.

Abstract

We experimentally study the effects of the split-award tort reform, where the state takes a share of the plaintiff's punitive damage award, on litigants' beliefs and bargaining outcomes. In addition, we study the formation of litigants' beliefs in a strategic environment. Our results provide support for coherence-based reasoning theories: coherence shifts in litigants' background beliefs (elicited before a role is assigned and after commitment to a choice at the pretrial bargaining stage) suggest bi-directionality between choices and beliefs. Our findings also suggest role-specific bias in the updating of plaintiffs' beliefs about firm's negligence. Finally, our findings indicate that split-awards affect plaintiffs' beliefs about fairness and lower out-of-court settlement amounts.

• Item Type: MPRA Paper
• Language: English
• Keywords: Tort Reform; Belief Formation; Split-Award Statute; Coherence-Based-Reasoning; Role-Specific Bias; Self-Serving Bias; Motivated Reasoning; Settlement; Litigation; Experiments; Debiasing through Law
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments; K - Law and Economics > K0 - General; K - Law and Economics > K1 - Basic Areas of Law > K13 - Tort Law and Product Liability ; Forensic Economics; A - General Economics and Teaching > A1 - General Economics > A12 - Relation of Economics to Other Disciplines; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K41 - Litigation Process

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