Assuring Civil Damages Adequately Deter: A Public Good Experiment

Abstract

To explore damages rules' deterrent effect we use a public good experiment to tailor punishment to rules used in civil litigation. The experimental treatments are analogous to: (1) damages limited to harm to an individual, (2) damages limited to harm to a group, such as in class actions, and (3) treble damages. For (1) and (2) we also manipulate the probability of a player being entitled to claim damages. The treatments with damages limited to harm to an individual do not prevent deterioration in cooperation over time but deterioration is slower. In the class action treatment, cooperation is stable over time if the probability of having to pay damages is sufficiently high. The same holds for the treble damages treatment. The results persist in variations of (1) and (2) in which the player imposing damages may have them forfeited with no benefit to her. We can therefore rule out that the beneficial effect of sanctions hinges on the participants knowing that the player imposing sanctions cannot intend to enrich herself.