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Spite and retaliation in pretrial bargaining

Author

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  • Ayouni, Mehdi
  • Friehe, Tim
  • Gabuthy, Yannick

Abstract

Why do disputes go to trial when parties agree about expected judgments? We model bargaining with private information about motives: plaintiffs may be spiteful, defendants may retaliate against spite. In the separating equilibrium, trials occur when spiteful plaintiffs meet retaliatory defendants, so observed trials are endogenously selected toward high-conflict pairings. In pooling equilibria, settlement is certain. Both types of equilibria can coexist for intermediate parameter values, suggesting small institutional changes can discontinuously affect trial rates.

Suggested Citation

  • Ayouni, Mehdi & Friehe, Tim & Gabuthy, Yannick, 2026. "Spite and retaliation in pretrial bargaining," Economics Letters, Elsevier, vol. 263(C).
    • Handle: RePEc:eee:ecolet:v:263:y:2026:i:c:s0165176526001163
    DOI: 10.1016/j.econlet.2026.112922
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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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