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Realising The Promise Of Costs Budgets: An Economic Analysis, Jay Tidmarsh

Journal Articles

The costs-budget system implemented in the Jackson reforms promises to keep litigation costs within socially appropriate bounds. To realise this promise fully however; the goal of this reform must be reoriented. Using real-options analysis, this article demonstrates that costs budgeting in its present form often fails to achieve a reduction of litigation costs to the socially appropriate level–defined to be the point at which the social benefits of litigation exceeds its costs–because parties may have a private incentive to invest socially excessive amounts on litigation. This result is true under both the English ("loser pays") and the American ("bear your …