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Pretrial negotiations under optimism

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  • Shoshana Vasserman
  • Muhamet Yildiz

Abstract

We develop a tractable and versatile model of pretrial negotiation in which the negotiating parties are optimistic about the judge's decision and anticipate the possible arrival of public information about the case prior to the trial date. The parties will settle immediately upon the arrival of information. However, they may also agree to settle prior to an arrival. We derive the settlement dynamics prior to an arrival: negotiations result in either immediate agreement, a weak deadline effect—settling at a particular date before the deadline, a strong deadline effect—settling at the deadline, or impasse, depending on the level of optimism. Our findings match stylized facts.

Suggested Citation

  • Shoshana Vasserman & Muhamet Yildiz, 2019. "Pretrial negotiations under optimism," RAND Journal of Economics, RAND Corporation, vol. 50(2), pages 359-390, June.
    • Handle: RePEc:bla:randje:v:50:y:2019:i:2:p:359-390
    DOI: 10.1111/1756-2171.12273
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    Cited by:

    1. Mehmet Ekmekci & Hanzhe Zhang, 2021. "Reputational Bargaining with Ultimatum Opportunities," Papers 2105.01581, arXiv.org.
    2. Guha, Brishti, 2019. "Malice in pretrial negotiations," International Review of Law and Economics, Elsevier, vol. 58(C), pages 25-33.
    3. Argenton, Cedric & Wang, Xiaoyu, 2020. "Litigation and Settlement under Loss Aversion," Other publications TiSEM b6c48abc-9b47-4c3b-848b-3, Tilburg University, School of Economics and Management.
    4. Cédric Argenton & Xiaoyu Wang, 2023. "Litigation and settlement under loss aversion," European Journal of Law and Economics, Springer, vol. 56(2), pages 369-402, October.
    5. Guha, Brishti, 2024. "Case preparation investments in the presence of costly judicial attention," Research in Economics, Elsevier, vol. 78(2).
    6. Luigi Alberto Franzoni, 2022. "Efficient liability law when parties genuinely disagree," Working Papers wp1176, Dipartimento Scienze Economiche, Universita' di Bologna.

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