ECONOMIC ANALYSIS OF LEGAL ERRORS IN JUDGMENTS OF FIRST INSTANCE CIVIL COURTS

The paper analyzes the impact of legal errors in judgments of first instance civil courts on the plaintiff' decisions to initiate litigation and settlement. According to the authors, the main reason for errors is the information asymmetry that is faithful companion of litigation. On the basis of economic models, the authors came to the conclusion that a reduction in the probability of errors of type I and / or increase the probability of errors of type II increases the likelihood of bringing a lawsuit, regardless of the rule for allocation the litigation costs. At lower subjective probabilities of victory of plaintiff, the English rule requires more intensive decrease in the probability of errors of type I and intense increase in the probability of errors of type II in order to avoid bringing a lawsuit. The reason is the additional risk of paying the total sum of litigation costs. Since the information asymmetry inevitably leads to a certain number of errors in judgments, the authors analyze the impact of errors on the social efficiency and the possibility of their adjustment to the optimum level.