Essays on Civil Litigation and Contest Theory
Date
2018
Authors
Chen, Bin (Ben)
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Abstract
This thesis primarily develops novel game-theoretic tools, and
applies these tools to study civil litigation in common law
jurisdictions — the process through which a private plaintiff
seeks judicial remedies against a private defendant.
First, this thesis models civil litigation as a simultaneous-move
contest between two litigants, each of whom exerts costly efforts
to maximize her monetary payoff. A success function describes the
litigants' respective probabilities of success based on their
efforts and exogenous relative advantages. Instead of having a
functional form, the success function satisfies general and
intuitive assumptions which capture frequently-used functional
forms. Another generalization is the cost-shifting rule, which
allows the winner to recover an exogenous proportion of her
litigation costs from the loser. There exists a unique Nash
equilibrium with positive efforts. In equilibrium, more cost
shifting makes the outcome of the case more predictable, but
typically increases the litigants' collective expenditure.
Second, further developing the litigation game, this thesis
allows monetary and emotional variables to motivate a plaintiff
and a defendant to exert costly efforts; the emotional variables
capture their relational emotions toward each other, and a
non-monetary joy of winning. In equilibrium, negative relational
emotions (but not positive joy of winning) amplify the effects of
cost shifting. Negative relational emotions increase the
equilibrium relative effort and probability of success of the
more advantageous litigant.
The novel tools developed to study litigation have broader
implications. Generalizing the litigation games is a contest game
of complete information, in which two players simultaneously
spend to compete for a prize. They have potentially different
probability-of-success functions and spillovers. Each success
function satisfies general and intuitive assumptions without
having a particular functional form. Applications of this game
capture optimism and pessimism in military conflicts, and
asymmetric R&D contests.
Finally, in addition to litigation efforts and costs, the great
variety of legal remedies affects substantive behaviors. This
thesis will reveal that, when private actions produce social
harm, the actor has incentives to take a socially optimal action
if she owes liabilities that optimize externalities. The proposed
theory of externalities optimization generalizes the existing
theory of externalities internalization, and explains
apparently-unrelated rules that optimize incentives when complete
internalization fails. Illustrating the proposed theory is an
innovative model in which the actor owes a restitutionary
liability to disgorge some of her private and a liability to
compensate for some of the social harm.
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Keywords
Litigation, civil litigation, cost shifting, intermediate cost shifting, fee shifting, intermediate fee shifting, contest theory, Tullock contests, arbitrary contests, contest success functions, arbitrary contest success functions, tournament theory, other-regarding preferences, relative preferences, emotions, emotional preferences, spite, spillovers, R&D, restitution, unjust enrichment, externalities, Coase theorem
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Thesis (PhD)
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