Asymmetric information, self-serving bias and the pretrial negotiation impasse
AbstractThere is evidence that asymmetric information does exist between litigants: not in a way supporting Bebchuk (1984)’s assumption that defendants’ degree of fault is private information, but more likely as a result of parties’ predictive capacity about the outcome at trial (Osborne, 1999). In this paper, we investigate the incidence of one component of this asymmetric predictive power, which has been examplified in experimental economics. We assume that litigants assess their priors on the plaintiff’s prevailing rate at trial in a way consistent with the self-serving bias, which is the source of the asymmetric information. We compare the predictions of this model regarding the influence of individual priors with those in the literature. Finally, we analyse the influence of another reason for probability distorsion, i.e. risk aversion in the sense of Yaari (1987).
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Bibliographic InfoPaper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2008-30.
Length: 19 pages
Date of creation: 2008
Date of revision:
litigation; pretrial bargaining; self-serving bias; risk aversion;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-14 (All new papers)
- NEP-CTA-2008-12-14 (Contract Theory & Applications)
- NEP-LAW-2008-12-14 (Law & Economics)
- NEP-UPT-2008-12-14 (Utility Models & Prospect Theory)
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