Population-Based Liability Determination, Mass Torts, and the Incentives for Suit, Settlement, and Trial

We explore how the incentives of a plaintiff, when considering filing suit and bargaining over settlement, differ between suits associated with stand-alone torts cases and suits involving mass torts. We contrast ‘‘individual-based liability determination’’ (IBLD), wherein a clear description of the mechanism by which a defendant’s actions translate into a plaintiff’s harm is available, with ‘‘population-based liability determination’’ (PBLD), wherein cases rely on the prevalence of harm in the population to persuade a judge or jury to draw an inference of causation or fault. PBLD creates a ‘‘rational optimism effect’’ on the plaintiff’s part that is inherent in many mass tort settings. This effect creates incentives for higher settlement demands and results in greater interim expected payoffs for plaintiffs and, thus, an increasedpropensity to file suit. Consequently, defendants in PBLD cases face increased ex ante expected costs compared with the IBLD regime, thereby increasing incentives to take care. (JEL K13, K41, D82)