Evidence Standards and Litigation: A Rent-Seeking Game

Abstract

In litigation models, the parties’ probability to succeed in a lawsuit hinge upon two main factors: the merits of the parties’ claims and their litigation efforts (Katz, 1988; Hirshleifer, 1989; Farmer and Pecorino, 1999). In this paper we extend this framework to consider an important procedural aspect of the legal system: the evidence standard. We recast the conventional rent-seeking model to consider how alternative evidence standards affect litigation choices. We analyze the interrelation between different evidence standards, the effectiveness of the parties’ efforts, and the merits of the case. We study how these factors jointly affect the parties’ litigation expenditures and the selection of cases brought to the courts. The evidence standard has different effects on different types of cases, reducing litigation for high-merit cases when standards are set low and increasing litigation for low-merit cases when standards are set high. This provides a valuable key for understanding the sorting effect of evidence standards and their role as a policy instrument in civil litigation.