Judge’s gate-keeping power and deterrence of negligent acts: an economic analysis of Twombly and Iqbal

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Abstract

Following its landmark decisions in Bell Atlantic v. Twombly and Ashcroft v. Iqbal, the Supreme Court allows federal judges to dismiss cases when the plaintiff’s allegations are conclusory or implausible, thereby increasing the judges’ discretionary power in pleading stages of litigation. Using a stylized litigation model, I find the conditions under which the ruling improves upon litigation outcomes by simultaneously raising deterrence and reducing litigation costs and error costs. In particular, I demonstrate the ways in which the ruling’s effect depends on the correlation between the potential injurers’ primary behavior and the strength of cases filed at trial courts.

Original languageEnglish
Pages (from-to)39-66
Number of pages28
JournalEuropean Journal of Law and Economics
Volume46
Issue number1
DOIs
Publication statusPublished - 2018 Aug 1

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All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Economics and Econometrics
  • Law

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