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Deterrence And Aggregate Litigation, Keith N. Hylton
Deterrence And Aggregate Litigation, Keith N. Hylton
Faculty Scholarship
This paper examines the deterrence properties of aggregate litigation and class actions, with an emphasis on positive value claims. In the multiple victim scenario with positive value claims, the probability that an individual victim will bring suit falls toward zero with geometric decay as the number of victims increases. The reason is that the incentive to free ride increases with the number of victims. Deterrence does not collapse but is degraded. Undercompliance is observed, which worsens as the number of victims increases. Compliance is never socially optimal, and the shortfall from optimality increases with the number of victims. These results, …
The Economics Of Class Actions And Class Action Waivers, Keith N. Hylton
The Economics Of Class Actions And Class Action Waivers, Keith N. Hylton
Faculty Scholarship
Class action litigation has generated a series of recent Supreme Court decisions imposing greater federal court supervision over the prosecution of collective injury claims. This group of cases raises the question whether class action waivers should be permitted on policy grounds. I examine the economics of class actions and waivers in this paper. I distinguish between the standard one-on-one litigation environment and the class action environment. In the standard environment, waivers between informed agents enhance society's welfare. In the class action environment, in contrast, not all waivers are likely to enhance society's welfare.