Dateline: April, 2007, Issue 6

How do jurors react to a defendant corporation's cost-benefit analysis?

Companies conduct cost-benefit analyses for many reasons, including to help improve safety. These cost-benefit analyses affect juror decision-making when introduced at trial.

Viscusi (2002) found that, across three different scenarios, juries awarded punitive damages more often against a company that performed a cost-benefit analysis before having an accident. Further, a company that did cost-benefit analysis before having an accident received a 50% higher punitive damages award. If the company used a high government-recommended value of life in doing the cost-benefit analysis, leading them to spend more on safety measures, the punitive damage awards went up an additional 20%.

Interestingly, what companies spent on safety had no significant effect on jurors' attitudes, nor did the number of deaths relative to the cost of eliminating a hazard. Instead, jurors reacted strongly and negatively when companies did cost-benefit analysis.

The researcher concluded that undertaking any type of risk analysis was harmful to the corporation's prospects at trial, both with respect to the probability of punitive damages and the magnitude of the award.

Source Viscusi, W. K. (2002). Corporate risk analysis: A reckless act? In C. R. Sunstein, R. Hastie, J. W. Payne, D. A. Schkade, & W. K. Viscusi (Eds.), Punitive damages: How juries decide (pp. 112-131). Chicago, IL: University of Chicago Press.