Rewards and Prizes

Abstract: Civil law jurisdictions treat the recovery of private rewards and prizes differently to common law jurisdictions. The recovery of rewards and prizes in civil law jurisdictions are “unconditional” whereas common law jurisdictions commonly require that the claimant has knowledge of the reward or prize in order to recover. This paper illustrates the differences in private incentives to offer rewards and prizes under different legal rules. I present a game theory model illustrating how the civil law rule can generate underinvestment in discovering socially-valuable information: The private incentive to offer a reward will depart from the socially-optimal outcome.