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- W2613344495 abstract "The paper analyzes the optimal incentive system when both legal and relational sanctions are imperfect. A firm sells a good to a sequence of consumers where the firm’s unobservable effort affects the good’s quality. To solve the commitment problem, the firm can promise to pay damages or induce relational sanctions. Both types of sanctions are costly, but legal sanctions have an advantage over relational sanctions. While raising damages creates both marginal (additional lawsuits) and infra-marginal incentive effects (bigger recovery to existing lawsuits), raising relational sanctions lacks the infra-marginal effect. Extensions, including litigation’s informational role and warranties, are also examined." @default.
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- W2613344495 date "2016-01-04" @default.
- W2613344495 modified "2023-09-23" @default.
- W2613344495 title "Using Costly Litigation in Repeat Interactions" @default.
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