Trial and settlement negotiations between asymmetrically skilled parties
AbstractParties engaged in a litigation generally enter the discovery process with different informations regarding their case and/or an unequal endowment in terms of skill and ability to produce evidence and predict the outcome of a trial. Hence, they have to bear different legal costs to assess the (equilibrium) plaintiff’s win rate. The paper analyses pretrial negotiations and revisits the selection hypothesis in the case where these legal expenditures are private information. This assumption is consistent with empirical evidence (Osborne, 1999). Two alternative situations are investigated, depending on whether there exists a unilateral or a bilateral informational asymmetry. Our general result is that efficient pretrial negotiations select cases with the smallest legal expenditures as those going to trial, while cases with largest costs prefer to settle. Under the one-sided asymmetric information assumption, we find that the American rule yields more trials and higher aggregate legal expenditures than the French and British rules. The two-sided case leads to a higher rate of trials, but in contrast provides less clear-cut predictions regarding the influence of fee-shifting.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CEREFIGE (Centre Europeen de Recherche en Economie Financiere et Gestion des Entreprises), Universite de Lorraine in its series Cahiers du CEREFIGE with number 0810.
Length: 31 pages
Date of creation: 2008
Date of revision: 2008
Contact details of provider:
Postal: Pôle Lorrain de Gestion, 13 rue Michel Ney, 54 000 Nancy
Web page: http://repec.cerefige.univ-lorraine.fr
More information through EDIRC
litigation; unilateral and bilateral asymmetric information; legal expenditures;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sebastien Liarte).
If references are entirely missing, you can add them using this form.