Can Decoupling Punitive Damages Deter an Injurer’s Harmful Activity?

Abstract

AbstractThis study theoretically analyzes the effect of decoupling punitive damages under the adversarial system. Decoupling means taking punitive award windfalls away from plaintiffs and placing them into state-administered funds. In particular, it aims to reveal the incentive structure of decoupling and examine how this affects human behaviors. Although some commentators argue that decoupling punitive damages effectively disgorges plaintiffs of any potential windfall without diminishing the deterrent effect of punitive damages, we demonstrate that decoupling actually reduces the deterrence effect under the adversarial system.