The Economics of Class Actions and Class Action Waivers

Abstract

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Test on the law protection of minority investors in China: Perspective of misrepresentation in securities market

“…While in Israel, Klement and Weinshall‐Margel (2016) even found class actions did not greatly facilitate access to courts and compensation, and they had limited success in realizing law enforcement and deterring violation. Hylton (2016) further found that compared with individual action, not all waivers are likely to enhance society's welfare in class action.…”

“…At present, although many interesting studies have been done, there is still scarcity of literature using panoramic cases and empirical research methods. In addition, related research is mainly concentrated in the United States (Hylton, 2016; Rosenberg & Spier, 2014), Taiwan (Chao, 2018), Hong Kong (Hu, 2017), and others. There are relatively fewer studies on the protection of minority investors in an emerging country, such as China.…”

Making Firms Liable for Consumers’ Mistaken Beliefs: Applications to the U.S. Mortgage and Credit Card Markets

“…Rosenberg and Spier (2014) argue that class action lawsuits allow numerous plaintiffs to pool their resources against a defendant that has much more at stake than an individual plaintiff, increasing social welfare by enabling both the combined plaintiff class and the defendant to make their best cases. Hylton (2016) argues that class action waivers present a, familiar from the industrial organization literature, problem of naked exclusion: the plaintiffs can accomplish something only by pooling their resources together; however, neither one of the class members is marginal, 31 See Fitzpatrick (2015) and Sternlight (2012Sternlight ( , 2015. In the standard consumer purchase context, a contract could be something that most consumers would not recognize as such: for example, "Monopoly" game's official terms that consumers are directed to read.…”

“…Rosenberg and Spier () argue that class action lawsuits allow numerous plaintiffs to pool their resources against a defendant that has much more at stake than an individual plaintiff, increasing social welfare by enabling both the combined plaintiff class and the defendant to make their best cases. Hylton () argues that class action waivers present a, familiar from the industrial organization literature, problem of naked exclusion: the plaintiffs can accomplish something only by pooling their resources together; however, neither one of the class members is marginal, and thus does not have the right incentive to invest in pooling resources . However, Hylton () also makes the point that some class action waivers might be efficient if a sufficient number of consumers do not waive their rights, using the familiar arguments for individual litigation waivers .…”

“…Hylton () argues that class action waivers present a, familiar from the industrial organization literature, problem of naked exclusion: the plaintiffs can accomplish something only by pooling their resources together; however, neither one of the class members is marginal, and thus does not have the right incentive to invest in pooling resources . However, Hylton () also makes the point that some class action waivers might be efficient if a sufficient number of consumers do not waive their rights, using the familiar arguments for individual litigation waivers . Choi and Spier () analyze product liability waivers in a model with moral hazard on the part of the producers and adverse selection on the part of the consumers.…”