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Costly Evidence Production and the Limits of Verifiability

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  • Bull Jesse

    () (Florida International University)

Abstract

This paper explores how the costs of disclosing evidence affect the attainment of desirable outcomes in contractual relationships with complete information. Not only does evidence production cost influence the players' incentives to disclose evidence, it also affects their willingness to participate in a contractual relationship in which they may have to disclose evidence to convey information to a court about the state of the relationship. In some situations, evidence costs can interfere with the attainment of efficient outcomes, but in other situations evidence costs can help with attainment of efficient outcomes. A two-player production game in which investment influences the value of production and the players contract so as to shape investment incentives is used to illustrate these situations.

Suggested Citation

  • Bull Jesse, 2008. "Costly Evidence Production and the Limits of Verifiability," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 8(1), pages 1-28, July.
  • Handle: RePEc:bpj:bejtec:v:8:y:2008:i:1:n:18
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    References listed on IDEAS

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    1. Steven Shavell, 1989. "Sharing of Information Prior to Settlement or Litigation," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 183-195, Summer.
    2. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
    3. Hyun Song Shin, 1998. "Adversarial and Inquisitorial Procedures in Arbitration," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 378-405, Summer.
    4. Bull, Jesse & Watson, Joel, 2004. "Evidence disclosure and verifiability," Journal of Economic Theory, Elsevier, vol. 118(1), pages 1-31, September.
    5. Bernardo, Antonio E & Talley, Eric & Welch, Ivo, 2000. "A Theory of Legal Presumptions," Journal of Law, Economics, and Organization, Oxford University Press, vol. 16(1), pages 1-49, April.
    6. Daniel L. Rubinfeld & David E.M. Sappington, 1987. "Efficient Awards and Standards of Proof in Judicial Proceedings," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 308-315, Summer.
    7. Shepherd, George B., 1999. "An empirical study of the economics of pretrial discovery," International Review of Law and Economics, Elsevier, vol. 19(2), pages 245-263, June.
    8. Jesse Bull, 2009. "Costly Evidence And Systems Of Fact-Finding," Bulletin of Economic Research, Wiley Blackwell, vol. 61(2), pages 103-125, April.
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    Citations

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    Cited by:

    1. Joel Watson, 2007. "Contract, Mechanism Design, and Technological Detail," Econometrica, Econometric Society, vol. 75(1), pages 55-81, January.
    2. Chris Sanchirico & George Triantis, "undated". "Evidence Arbitrage: The Fabrication of Evidence and the Verifiability of Contract Performance," Scholarship at Penn Law upenn_wps-1005, University of Pennsylvania Law School.
    3. Bull, Jesse & Watson, Joel, 2007. "Hard evidence and mechanism design," Games and Economic Behavior, Elsevier, vol. 58(1), pages 75-93, January.
    4. Alan Schwartz & Joel Watson, "undated". "The Law and Economics of Costly Contracting," Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy Working Paper Series yale_lepp-1004, Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy.
    5. Manuel Willington, 2013. "Hold Up Under Costly Litigation and Imperfect Courts of Law," Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(5), pages 1023-1055, October.
    6. Alan Schwartz, 2004. "The Law and Economics of Costly Contracting," Journal of Law, Economics, and Organization, Oxford University Press, vol. 20(1), pages 2-31, April.
    7. Bull Jesse, 2008. "Mechanism Design with Moderate Evidence Cost," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 8(1), pages 1-20, May.
    8. Bull, Jesse & Watson, Joel, 2004. "Evidence disclosure and verifiability," Journal of Economic Theory, Elsevier, vol. 118(1), pages 1-31, September.
    9. repec:aea:aejmic:v:9:y:2017:i:2:p:188-225 is not listed on IDEAS

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