The Timing of Out-of-Court Settlements Revisited: Theory and Cross- Sectional Evidence from Texas since 1988
AbstractLegal institutions play an important role in affecting delay in settlement. But little research has investigated the institutional causes of delay. The empirical literature is ambiguous regarding the impact of trial-court delay on settlement delay. I analyze the timing of bargaining and the causes of delay using a cross-section of insurance claims in Texas over a 20-year span. I discuss a dynamic model of pretrial negotiation to illustrate how changes in the legal systems might affect the duration of settlement. Comparative statics results are then corroborated with empirical estimates of a hazard function adjusted to account for the heterogeneity of claims and the time dependence suggested by theory. Statistical tests are consistent with the theoretic prediction that delay in trial courts expedites out-of-court settlement. I also find that alternative dispute resolution, a legal process designed to save transaction costs, reduces the rapidity of settlement. Prejudgement interest, a law introduced to reduce delay, actually causes a greater delay in settlement. The results have implications for efficiency of the judicial system and reform efforts aiming to reduce delay.
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 Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 347.
Date of creation: Dec 2010
Date of revision:
Contact details of provider:
Postal: Geschwister-Scholl-Platz 1, D-80539 Munich, Germany
Web page: http://www.sfbtr15.de/
More information through EDIRC
settlement delay; trial-court delay; prejudgment interest; alternative dispute resolution;
Find related papers by JEL classification:
- K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-03 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joni Hersch & Jeffrey O'Connell & W. Kip Viscusi, 2007. "An Empirical Assessment of Early Offer Reform for Medical Malpractice," The Journal of Legal Studies, University of Chicago Press, vol. 36(S2), pages S231-S259, 06.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alexandra Frank).
If references are entirely missing, you can add them using this form.