Loss Aversion, Omission Bias, and the Burden of Proof in Civil Litigation

Abstract

AbstractThe general standard of proof in civil litigation is preponderance of the evidence. To prevail, the plaintiff must establish the case with a probability exceeding .5. We argue that since litigants tend to take the status quo as the reference point, dismissal of a claim is likely to be perceived as denying the plaintiff gains, and acceptance of a claim is likely to be perceived as inflicting losses on the defendant. Loss aversion thus justifies placing the burden of proof on the plaintiff. Notwithstanding the formal rule, our experimental findings suggest that the actual standard of proof in civil litigation is most likely higher than 51 percent. This phenomenon is plausibly due to fact finders’ omission bias. To minimize the total costs of judicial errors, loss aversion calls for setting the standard of proof considerably higher than 51 percent. Conflicting considerations militate against this proposal, however.