IDEAS home Printed from https://ideas.repec.org/a/ucp/jlawec/v41y1998i2p451-76.html
   My bibliography  Save this article

Reconciling Asymmetric Information and Divergent Expectations Theories of Litigation

Author

Listed:
  • Waldfogel, Joel

Abstract

Both asymmetric information (AI) and divergent expectations (DE) theories offer possible explanations of the litigation puzzle. Under DE, cases proceed to trial when, by chance, the plaintiff is more optimistic than the defendant. As the fraction of cases tried (T) declines, this leads to a tendency toward 50 percent plaintiff win rates at trial (P), regardless of the fraction of plaintiff winners in the filed population. Under AI, by contrast, informed parties proceed to trial only when they expect to win. Hence, as the fraction of cases tried declines, plaintiff win rates at trial tend toward either 0 or 1. We present evidence that the relationship between T and P generated by the litigation process is consistent with DE and not AI. We also offer evidence of the presence of AI early in litigation in the form of one-sided plaintiff win rates in cases adjudicated prior to trial. We reconcile these two findings with evidence that pretrial adjudication and settlement culls both likely plaintiff winners and likely plaintiff losers from the filed pool, causing a tendency toward central rather than extreme plaintiff win rates at trial.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Waldfogel, Joel, 1998. "Reconciling Asymmetric Information and Divergent Expectations Theories of Litigation," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 451-476, October.
    • Handle: RePEc:ucp:jlawec:v:41:y:1998:i:2:p:451-76
    DOI: 10.1086/467397
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/467397
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: https://libkey.io/10.1086/467397?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    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. Lucian Arye Bebchuk, 1984. "Litigation and Settlement under Imperfect Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 404-415, Autumn.
    3. Waldfogel, Joel, 1995. "The Selection Hypothesis and the Relationship between Trial and Plaintiff Victory," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 229-260, April.
    4. Hay, Bruce L, 1994. "Civil Discovery: Its Effects and Optimal Scope," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 481-515, January.
    5. Wittman, Donald, 1988. "Dispute Resolution, Bargaining, and the Selection of Cases for Trial: A Study of the Generation of Biased and Unbiased Data," The Journal of Legal Studies, University of Chicago Press, vol. 17(2), pages 313-352, June.
    6. Kessler, Daniel & Meites, Thomas & Miller, Geoffrey P, 1996. "Explaining Deviations from the Fifty-Percent Rule: A Multimodal Approach to the Selection of Cases for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 25(1), pages 233-259, January.
    7. Shavell, Steven, 1996. "Any Frequency of Plaintiff Victory at Trial Is Possible," The Journal of Legal Studies, University of Chicago Press, vol. 25(2), pages 493-501, June.
    8. Barry Nalebuff, 1987. "Credible Pretrial Negotiation," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 198-210, Summer.
    9. William M. Landes, 1974. "An Economic Analysis of the Courts," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 164-214, National Bureau of Economic Research, Inc.
    10. Froeb, Luke, 1993. "The adverse selection of cases for trial," International Review of Law and Economics, Elsevier, vol. 13(3), pages 317-324, September.
    11. 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 435-463, January.
    12. Eisenberg, Theodore, 1990. "Testing the Selection Effect: A New Theoretical Framework with Empirical Tests," The Journal of Legal Studies, University of Chicago Press, vol. 19(2), pages 337-358, June.
    13. George L. Priest & Benjamin Klein, 1984. "The Selection of Disputes for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 13(1), pages 1-56, January.
    14. Grossman, Gene M & Katz, Michael L, 1983. "Plea Bargaining and Social Welfare," American Economic Review, American Economic Association, vol. 73(4), pages 749-757, September.
    15. Theodore Eisenberg, 1991. "The Relationship between Plaintiff Success Rates before Trial and at Trial," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 154(1), pages 111-116, January.
    16. Siegelman, Peter & Donohue, John J, III, 1995. "The Selection of Employment Discrimination Disputes for Litigation: Using Business Cycle Effects to Test the Priest-Klein Hypothesis," The Journal of Legal Studies, University of Chicago Press, vol. 24(2), pages 427-462, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Keith N. Hylton & Haizhen Lin, 2009. "Trial Selection Theory: A Unified Model," Working Papers 2009-06, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    2. Daniel P. Kessler & Daniel L. Rubinfeld, 2004. "Empirical Study of the Civil Justice System," NBER Working Papers 10825, National Bureau of Economic Research, Inc.
    3. Joni Hersch, 2006. "Demand for a Jury Trial and the Selection of Cases for Trial," The Journal of Legal Studies, University of Chicago Press, vol. 35(1), pages 119-142, January.
    4. Lee, Yoon-Ho Alex & Klerman, Daniel, 2016. "The Priest-Klein hypotheses: Proofs and generality," International Review of Law and Economics, Elsevier, vol. 48(C), pages 59-76.
    5. David S. Kaplan & Joyce Sadka & Jorge Luis Silva‐Mendez, 2008. "Litigation and Settlement: New Evidence from Labor Courts in Mexico," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 5(2), pages 309-350, June.
    6. J.J. Prescott & Kathryn E. Spier & Albert Yoon, 2014. "Trial and Settlement: A Study of High-Low Agreements," NBER Working Papers 19873, National Bureau of Economic Research, Inc.
    7. Poitras, Marc & Frasca, Ralph, 2011. "A unified model of settlement and trial expenditures: The PriestâKlein model extended," International Review of Law and Economics, Elsevier, vol. 31(3), pages 188-195, September.
    8. J.J. Prescott & Kathryn E. Spier & Albert Yoon, 2014. "Trial and Settlement: A Study of High-Low Agreements," Journal of Law and Economics, University of Chicago Press, vol. 57(3), pages 699-746.
    9. Daniel Klerman & Yoon-Ho Alex Lee, 2014. "Inferences from Litigated Cases," The Journal of Legal Studies, University of Chicago Press, vol. 43(2), pages 209-248.
    10. Steven Shavell, 2003. "Economic Analysis of Litigation and the Legal Process," NBER Working Papers 9697, National Bureau of Economic Research, Inc.
    11. Berlemann, Michael & Christmann, Robin, 2019. "Determinants of in-court settlements: empirical evidence from a German trial court," Journal of Institutional Economics, Cambridge University Press, vol. 15(1), pages 143-162, February.
    12. Álvaro Bustos & Pablo Bravo-Hurtado & Antonio Aninat, 2020. "The (Other) Effects of Restricting Access to Higher Courts: The Case of Wrongful Terminations in Labor Contracts in Chile," Documentos de Trabajo 534, Instituto de Economia. Pontificia Universidad Católica de Chile..
    13. Dari-Mattiacci, Giuseppe & Deffains, Bruno & Lovat, Bruno, 2011. "The dynamics of the legal system," Journal of Economic Behavior & Organization, Elsevier, vol. 79(1), pages 95-107.
    14. Yasutora Watanabe, 2005. "Learning and Bargaining in Dispute Resolution: Theory and Evidence from Medical Malpractice Litigation," 2005 Meeting Papers 440, Society for Economic Dynamics.
    15. Hylton, Keith N., 2002. "An asymmetric-information model of litigation," International Review of Law and Economics, Elsevier, vol. 22(2), pages 153-175, August.
    16. Peter Grajzl & Katarina Zajc, 2017. "Litigation and the timing of settlement: evidence from commercial disputes," European Journal of Law and Economics, Springer, vol. 44(2), pages 287-319, October.
    17. David Gliksberg, 2014. "Does the Law Matter? Win Rates and Law Reforms," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 11(2), pages 378-407, June.
    18. Giuseppe Dari-Mattiacci & Bruno Deffains, 2007. "Uncertainty of Law and the Legal Process," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(4), pages 627-656, December.
    19. Chopard, Bertrand & Cortade, Thomas & Langlais, Eric, 2010. "Trial and settlement negotiations between asymmetrically skilled parties," International Review of Law and Economics, Elsevier, vol. 30(1), pages 18-27, March.
    20. Andrew F. Daughety & Jennifer F. Reinganum, 1995. "Keeping Society in the Dark: On the Admissibility of Pretrial Negotiations as Evidence in Court," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 203-221, Summer.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jlawec:v:41:y:1998:i:2:p:451-76. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/JLE .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.