Mechanism Design and Behavioral Economics: Incentivizing Optimal Pre-Trial Discovery

Abstract

Practitioners and judges recognize excessive civil discovery to be a widespread and serious issue. Since litigants bear only a small portion of the costs of their own discovery requests and face unconscious psychological biases, they regularly seek far more discovery than would be relevant and proportional to proving their case. This in turn massively inflates litigation costs for their opponents. The 2015 Amendments to the Federal Rules of Civil Procedure (FRCP) recognized and confronted this problem directly: they rewrote Rule 26(b)(1) to encourage judges to more actively ensure that discovery requests are “proportional” to the needs of the case. In showing precisely how judges should implement the revised Rule 26(b)(1), I first explore the causes underlying excessive discovery. I draw on insights from classical economics (which understands litigants as purely rational actors) and from behavioral economics (which explores litigants’ psychological biases) to explain the current prevalence of excessive discovery. I then use techniques from mechanism design, a branch of mathematical economics, to develop a new discovery system. Under this system, judges formulate rigorously the “proportionality” standard envisioned in the amended FRCP, which they implement by correcting for the aforementioned causes of excessive discovery. I conclude by exploring questions regarding this proposed system’s real-world feasibility.