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Hindsight in Commercial Damages Analysis
- Article from:
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Journal of Legal Economics
- Article date:
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March 1, 2008
- Author:
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Copyright informationCopyright American Academy of Economic and Financial Experts Mar 2008. Provided by ProQuest LLC. (Hide copyright information)
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Abstract Whether hindsight should and can be used in commercial damage calculations presents an interesting question from both an economic and legal perspective. A strong economic argument can be made that given certain restrictive assumptions hindsight should be ignored. Courts, however, appear rather eclectic in allowing damage calculations based on hindsight. This paper shows that in a model characterized by efficient markets hindsight results in overcompensation of the plaintiff. In a two-state model characterized by positive expected economic profits and litigation costs, however, hindsight can work for or against the plaintiff. It is shown that the advantage, if any, that hindsight ...
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