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Costly Evidence Production and the Limits of Verifiability

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  • Bull Jesse

    ()
    (Florida International University)

Abstract

This paper explores how the costs of disclosing evidence affect the attainment of desirable outcomes in contractual relationships with complete information. Not only does evidence production cost influence the players' incentives to disclose evidence, it also affects their willingness to participate in a contractual relationship in which they may have to disclose evidence to convey information to a court about the state of the relationship. In some situations, evidence costs can interfere with the attainment of efficient outcomes, but in other situations evidence costs can help with attainment of efficient outcomes. A two-player production game in which investment influences the value of production and the players contract so as to shape investment incentives is used to illustrate these situations.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 8 (2008)
Issue (Month): 1 (July)
Pages: 1-28

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Handle: RePEc:bpj:bejtec:v:8:y:2008:i:1:n:18

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References

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  1. Maskin, Eric & Moore, John, 1999. "Implementation and Renegotiation," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 39-56, January.
  2. Bull, Jesse & Watson, Joel, 2000. "Evidence Disclosure and Verifiability," University of California at San Diego, Economics Working Paper Series qt6th0060j, Department of Economics, UC San Diego.
  3. Cooter, Robert D & Rubinfeld, Daniel L, 1994. "An Economic Model of Legal Discovery," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 435-63, January.
  4. Okuno-Fujiwara, Masahiro & Postlewaite, Andrew & Suzumura, Kotaro, 1990. "Strategic Information Revelation," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 25-47, January.
  5. Joel Watson & Jesse Bull, 2004. "Hard Evidence and Mechanism Design," Econometric Society 2004 North American Winter Meetings 433, Econometric Society.
  6. Deneckere,R. & Severinov,S., 2001. "Mechanism design and communication costs," Working papers 23, Wisconsin Madison - Social Systems.
  7. Froeb, Luke M. & Kobayashi, Bruce H., 2001. "Evidence production in adversarial vs. inquisitorial regimes," Economics Letters, Elsevier, vol. 70(2), pages 267-272, February.
  8. Antonio Bernardo & Eric L. Talley & Ivo Welch, 1999. "A Theory of Legal Presumptions," Yale School of Management Working Papers ysm118, Yale School of Management.
  9. Alan Schwartz & Joel Watson, . "The Law and Economics of Costly Contracting," Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy Working Paper Series yale_lepp-1004, Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy.
  10. repec:cdl:ucsdec:540003 is not listed on IDEAS
  11. Shepherd, George B., 1999. "An empirical study of the economics of pretrial discovery," International Review of Law and Economics, Elsevier, vol. 19(2), pages 245-263, June.
  12. Gong, Jiong & McAfee, R Preston, 2000. "Pretrial Negotiation, Litigation, and Procedural Rules," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 218-38, April.
  13. Daughety, Andrew F & Reinganum, Jennifer F, 2000. "On the Economics of Trials: Adversarial Process, Evidence, and Equilibrium Bias," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(2), pages 365-94, October.
  14. Evans, R., 2006. "Mechanism Design with Renegotiation and Costly Messages," Cambridge Working Papers in Economics 0626, Faculty of Economics, University of Cambridge.
  15. Chris Sanchirico & George Triantis, . "Evidentiary Arbitrage: The Fabrication of Evidence and The Verifiability of Contract Performance," University of Virginia John M. Olin Program for Law & Economics Working Paper Series uvalwps-1011, University of Virginia School of Law.
  16. Bull Jesse, 2008. "Mechanism Design with Moderate Evidence Cost," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 8(1), pages 1-20, May.
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Cited by:
  1. Bull, Jesse & Watson, Joel, 2002. "Hard Evidence and Mechanism Design," University of California at San Diego, Economics Working Paper Series qt7715f08f, Department of Economics, UC San Diego.
  2. Schwartz, Alan & Watson, Joel, 2001. "The Law and Economics of Costly Contracting," University of California at San Diego, Economics Working Paper Series qt2wh8m7bv, Department of Economics, UC San Diego.
  3. Joel Watson, 2002. "Contract, Mechanism Design, and Technological Detail," Theory workshop papers 505798000000000006, UCLA Department of Economics.
  4. C. Manuel Willington, . "Hold-Up under Costly Litigation and Imperfect Courts of Law," ILADES-Georgetown University Working Papers inv144, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  5. Bull, Jesse & Watson, Joel, 2004. "Evidence disclosure and verifiability," Journal of Economic Theory, Elsevier, vol. 118(1), pages 1-31, September.
  6. Chris Sanchirico & George Triantis, . "Evidence Arbitrage: The Fabrication of Evidence and the Verifiability of Contract Performance," Scholarship at Penn Law upenn_wps-1005, University of Pennsylvania Law School.
  7. Alan Schwartz, 2004. "The Law and Economics of Costly Contracting," Journal of Law, Economics and Organization, Oxford University Press, vol. 20(1), pages 2-31, April.

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