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Pretrial Bargaining and the Design of Fee-Shifting Rules

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Author Info
Kathryn E. Spier
Abstract

Legal rules for allocating the private costs of civil litigation, or "fee-shifting" rules, provide powerful incentives for settlement. Within the context of a direct-revelation mechanism, the fee-shifting rule that generates the highest probability of settlement bases the allocation of costs upon the proximity of the court's award to the pretrial announcements. This mechanism resembles Rule 68 of the Federal Rules of Civil Procedure and other offer-based rules. In a simple extensive-form game, if the litigants have asymmetric information about the level of damages (probability of prevailing), then Rule 68 increases (decreases) the settlement rate.

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Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 25 (1994)
Issue (Month): 2 (Summer)
Pages: 197-214
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Handle: RePEc:rje:randje:v:25:y:1994:i:summer:p:197-214

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  1. Michael R. Baye & Dan Kovenock & Casper G. de Vries, 2004. "Comparative Analysis of Litigation Systems: An Auction-Theoretic Approach," Working Papers 2004-24, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
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  2. Jean O. Lanjouw & Josh Lerner, 1996. "Preliminary Injunctive Relief: Theory and Evidence from Patent Litigation," NBER Working Papers 5689, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Jean O. Lanjouw & Mark Schankerman, 1997. "Stylized Facts of Patent Litigation: Value, Scope and Ownership," NBER Working Papers 6297, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Coughlan, Peter J. & Plott, Charles R., 1997. "An Experimental Analysis of the Structure of Legal Fees: American Rule vs. English Rule," Working Papers 1025, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  5. Jean Olson Lanjouw, 1994. "Economic Consequences of a Changing Litigation Environment: The Case of Patents," NBER Working Papers 4835, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Robert Cooter & Winand Emons, 2004. "Truth-Bonding and Other Truth-Revealing Mechanisms for Courts," European Journal of Law and Economics, Springer, vol. 17(3), pages 307-327, May. [Downloadable!] (restricted)
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  7. Oliver Gürtler & Matthias Kräkel, 2007. "Double-Sided Moral Hazard, Efficiency Wages and Litigation," Bonn Econ Discussion Papers bgse14_2007, University of Bonn, Germany. [Downloadable!]
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  8. Lucian Arye Bebchuk & Howard F. Chang, 2000. "The Effect of Offer-of-Settlement Rules on the Terms of Settlement," NBER Working Papers 6509, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Stefano Comino & Antonio Nicolò & Piero Tedeschi, 2005. "Termination Clauses in Partnerships," Industrial Organization 0509007, EconWPA. [Downloadable!]
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  10. Helmut Bester & Karl Wärneryd, 2006. "Conflict and the Social Contract," Discussion Papers 94, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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  11. Bester, Helmut & Konrad, Kai A, 2003. "Delay in Contests," CEPR Discussion Papers 3784, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Michael R. Baye & Dan Kovenock & Casper G. de Vries, 2000. "Comparative Analysis of Litigation Systems: An Auction-Theoretic Approach," Tinbergen Institute Discussion Papers 00-103/2, Tinbergen Institute. [Downloadable!]
  13. Cremers, Katrin, 2004. "Determinants of Patent Litigation in Germany," ZEW Discussion Papers 04-72, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  14. Jean Olson Lanjouw & Mark Schankerman, 1998. "Stylised Fact of Patent Litigation: Value, Scope and Ownership," STICERD - Economics of Industry Papers 20, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
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