It's often said that a class action makes sense as a tool for aggregating negative-value claims (claims that even if litigated successfully on an individual basis result in a loss to the plaintiff). In Deterrence and Aggregate Litigation, law prof Keith Hylton looks at positive-value claims and finds that optimal deterrence is served by class actions there too. Here's the abstract:
This paper examines the deterrence properties of aggregate litigation and class actions, with an emphasis on positive value claims. In the multiple victim scenario with positive value claims, in the absence of the class action device, the probability that an individual victim will bring suit falls toward zero with geometric decay as the number of victims increases. The reason is that the incentive to free ride increases with the number of victims. Deterrence does not collapse but is degraded. Undercompliance is observed, which worsens as the number of victims increases. Compliance is never socially optimal, and the shortfall from optimality increases with the number of victims. These results, which continue to hold even if victims anticipate being joined in a single forum, suggest a more nuanced and potentially more robust justification for the class action than has hitherto been provided. Implications for collusive settlements of class action litigation are discussed.
