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Pricing Damages for Pain and Suffering in Court: The Impact of the Valuation Method
Author(s) -
FlatscherThöni Magdalena,
Leiter Andrea M.,
Winner Hannes
Publication year - 2013
Publication title -
journal of empirical legal studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.529
H-Index - 24
eISSN - 1740-1461
pISSN - 1740-1453
DOI - 10.1111/jels.12004
Subject(s) - damages , pain and suffering , valuation (finance) , compensation (psychology) , actuarial science , economics , contingent valuation , law , econometrics , psychology , political science , microeconomics , social psychology , willingness to pay , accounting
We analyze the pricing of pain and suffering and, in particular, whether the corresponding compensation for pain and suffering is affected by a court's approach to valuing such damages. For this purpose, we use data on pain and suffering verdicts in A ustria, where courts are generally free to choose between a per‐diem and a lump‐sum scheme to assess damages for pain and suffering. The per‐diem approach was introduced in 1990 but was not adopted in all A ustrian provincial courts. This enables us to estimate the causal impact of the change in calculation schemes. Applying a difference‐in‐difference framework to estimate this treatment effect, we observe that courts increased their compensation by about 38 percent to 59 percent after the implementation of the per‐diem scheme.