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Comparing All-or-Nothing and Proportionate Damages: A Rent-Seeking Approach

  • Jef De Mot and Thomas J. Miceli EMAIL logo
From the journal Review of Law & Economics


This paper compares the all-or-nothing and proportionate damage rules for allocating damages in tort cases under evidentiary uncertainty. The focus is on how the two rules affect litigation expenditures by plaintiffs and defendants. The results of simulation experiments show that the expected judgment at trial is higher under the all-or-nothing rule for cases where the defendant did not take adequate care, but the judgment is higher under the proportionate rule when the defendant took more than adequate care. As for litigation expenditures, assuming equal costs of litigation, overall expenditures are higher under the all-or-nothing rule, except for very weak and very strong cases.

JEL Classification: K13; K41


With respect to the all-or-nothing rule, the first-order conditions for X and Y are:


From these conditions, it follows that


Putting this result back into the first-order conditions gives us the equilibrium expenditures for the plaintiff and defendant, respectively:


The expected value of trial for the plaintiff under this rule is


while the expected cost of trial for the defendant is


Under the proportional rule, the antiderivative of




The first-order conditions are:


from which it follows that


Putting this result back in the first-order conditions gives us the Nash equilibrium effort levels of the two parties:


The resulting total expenditures of the plaintiff and the defendant, respectively, are


The expected judgment equals:


The expected value of trial for the plaintiff is


while the expected loss of the defendant equals:



We acknowledge the helpful comments of a reviewer and Francesco Parisi (the editor).


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Published Online: 2015-2-21
Published in Print: 2015-3-1

©2015 by De Gruyter

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