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Settling with salience-biased defendants

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  • Friehe, Tim
  • Pham, Cat Lam

Abstract

This paper analyzes how a salience bias of the defendant influences the settlement process and outcome. We consider the classic screening model in which the plaintiff makes a settlement demand on the privately informed defendant. In our framework, the plaintiff’s settlement demand increases with the defendant’s salience bias and the defendant’s salience bias may make the plaintiff worse off.

Suggested Citation

  • Friehe, Tim & Pham, Cat Lam, 2020. "Settling with salience-biased defendants," Economics Letters, Elsevier, vol. 192(C).
    • Handle: RePEc:eee:ecolet:v:192:y:2020:i:c:s0165176520301658
    DOI: 10.1016/j.econlet.2020.109235
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    References listed on IDEAS

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    8. Farmer, Amy & Pecorino, Paul, 2002. "Pretrial bargaining with self-serving bias and asymmetric information," Journal of Economic Behavior & Organization, Elsevier, vol. 48(2), pages 163-176, June.
    9. Theodore Eisenberg & Charlotte Lanvers, 2009. "What is the Settlement Rate and Why Should We Care?," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 6(1), pages 111-146, March.
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    11. Thomas J. Miceli, 2008. "An Equilibrium Model of Lawmaking," Working papers 2008-16, University of Connecticut, Department of Economics.
    12. Herweg, Fabian & Müller, Daniel & Weinschenk, Philipp, 2017. "Salience, competition, and decoy goods," Economics Letters, Elsevier, vol. 153(C), pages 28-31.
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    Citations

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    Cited by:

    1. Cédric Argenton & Xiaoyu Wang, 2023. "Litigation and settlement under loss aversion," European Journal of Law and Economics, Springer, vol. 56(2), pages 369-402, October.
    2. Fabio Römeis & Fabian Herweg & Daniel Müller, 2022. "Salience Bias and Overwork," Games, MDPI, vol. 13(1), pages 1-22, January.

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    More about this item

    Keywords

    Litigation; Screening; Salience;
    All these keywords.

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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