Working Paper No. 07-42:
Civil Procedure: General Economic Analysis
Date Posted: 2007
The economic analysis of civil litigation has focused on the action of the litigants and on the effects of substantive and procedural rules on their behavior. This chapter focuses on the economic analysis of procedural rules and how these rules alter the incentives of the litigants to file, settle and litigate disputes. Such procedural rules affect the private costs and benefits of litigation through altering the net expected value and loss faced by the plaintiff and defendant. Procedural rules also affect the social costs and benefits of litigation by affecting the both the direct and error costs of litigation. The analysis in the chapter is organized around the US Federal Rules of Civil Procedure, and in reverse chronological order to reflect the economic analyses use of backwards induction to examine civil litigation. Topics examined in depth include sequencing rules, rules that affect the capitalization of litigation over parties and claims, the rules of discovery, and juries.