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The Analysis of Changes in the Contract Zone on Pre-Trial Bargaining Outcome under Incomplete Information

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  • Kim Helena Hye-Young

    (Korea University - Korea)

Abstract

It has been often argued in industrial relations and law and economics literature that enlarging the contract zone, by increasing the costs of disagreement, helps to reduce the bargaining impasse improving the bargaining result. For example, when the costs of disagreement rise, such as the costs of a trial, this will make a pre-trial settlement more attractive for disputing parties in a civil lawsuit. But the paper shows that this is not necessarily true, that the increase in the costs of disagreement may have a perverse effect of increasing the probability that the bargaining ends in disagreements.

Suggested Citation

  • Kim Helena Hye-Young, 2011. "The Analysis of Changes in the Contract Zone on Pre-Trial Bargaining Outcome under Incomplete Information," Asian Journal of Law and Economics, De Gruyter, vol. 2(2), pages 1-13, July.
    • Handle: RePEc:bpj:ajlecn:v:2:y:2011:i:2:n:4
    DOI: 10.2202/2154-4611.1029
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    References listed on IDEAS

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    1. Kathryn E. Spier, 1992. "The Dynamics of Pretrial Negotiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(1), pages 93-108.
    2. Ordover, Janusz A. & Rubinstein, Ariel, 1983. "On Bargaining, Settling, and Litigation: A Problem in Multistage Games With Imperfect Information," Working Papers 83-07, C.V. Starr Center for Applied Economics, New York University.
    3. Wang, Gyu Ho & Kim, Jeong-Yoo & Yi, Jong-Goo, 1994. "Litigation and Pretrial Negotiation under Incomplete Information," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 10(1), pages 187-200, April.
    4. Crawford, Vincent P, 1982. "A Theory of Disagreement in Bargaining," Econometrica, Econometric Society, vol. 50(3), pages 607-637, May.
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