Coase-Sandor Working Paper Series in Law and Economics
There are numerous areas of the law in which the victim of a wrongdoing has the right to obtain damages that compensate her for harm. When the wrongdoing also creates a benefit—either for the same victim or for a third party—a question arises as to whether the damages should be reduced to reflect that benefit. The law is unclear, and courts frequently act inconsistently. We argue that courts should deduct the benefit when it is not offset by another harm to a third party, and would not have existed but for the wrongdoing. We also argue that courts need to take into account the effect of deductions on victims’ and beneficiaries’ incentives to take care, and that measurement difficulties and other complex causal issues provide a basis for denying deductions in many cases.
Eric Posner & Ariel Porat, "Offsetting Benefits" (Coase-Sandor Institute for Law & Economics Working Paper No. 675, 2014).