Within a class action suit, similarly injured individuals can collectively obtain compensation through the justice system. Damage averaging occurs when the compensation awarded by the court to individual members is partly or completely determined by the average damage of the class. The key role of damage averaging in influencing the identity of the individual that will initiate the class action suit is illustrated in a waiting game. If there is complete averaging, the individual with the lowest damage will initiate the class action suit, while if there is less damage averaging, other individuals may do so.
Marceau, N., & Mongrain, S. (2003). Damage averaging and the formation of class action suits. International Review of Law and Economics, 23(1), 63–74. https://doi.org/10.1016/S0144-8188(03)00014-0