If a potential tort plaintiff can predict that the court will overestimate damages, he is more likely to bring suit, but if the court is aware of this, it will adjust its awards accordingly. In general, court error implies that the court should moderate extreme awards whether they are high or low, because of regression towards the mean. Predictable error, however, tends to push the optimal adjustment downwards, and unpredictable error pushes it upwards, because of plaintiff selection and signaling, respectively. Errors of either kind can lead plaintiffs to bring meritless suits.
Research & Publications
Predictable and Unpredictable Error in Tort Awards: The Effect of Plaintiff Self Selection and Signalling
1995, International Review of Law and Economics
Eric Bennett Rasmusen
Rasmusen, Eric Bennett (1995), "Predictable and Unpredictable Error in Tort Awards: The Effect of Plaintiff Self Selection and Signalling," International Review of Law and Economics, Vol. 15, September, 323-345.