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The dynamics of one-sided incomplete information in motor disputes

Author

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  • Ayuso, Mercedes
  • Bermúdez, Lluís
  • Santolino, Miguel

Abstract

The paper examines the distribution function of settlements over time in an attempt to explain the time it takes to negotiate the claim compensation in the context of motor disputes. Competing risk models are applied to a Spanish motor insurance database. The empirical analysis yielded two main findings. First, in some cases the severity of temporary injuries was found to be negatively associated with the time to settlement of the claim, suggesting that more severe cases do not always take longer to settle; this supports the assumption that the time to settlement depends primarily on the degree of informational asymmetry among litigants regarding the magnitude of damages. Second, time-varying effects were observed for the explanatory factors related to the victim's age and the seriousness of injuries. The effect of these factors on the time to settlement of the claim is attenuated over time, suggesting that the asymmetries in information present a dynamic pattern during the negotiation process, since the insurer's incomplete information is enriched during the course of negotiations.

Suggested Citation

  • Ayuso, Mercedes & Bermúdez, Lluís & Santolino, Miguel, 2015. "The dynamics of one-sided incomplete information in motor disputes," International Review of Law and Economics, Elsevier, vol. 41(C), pages 77-85.
  • Handle: RePEc:eee:irlaec:v:41:y:2015:i:c:p:77-85
    DOI: 10.1016/j.irle.2014.11.004
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    References listed on IDEAS

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    1. Kathryn E. Spier, 1992. "The Dynamics of Pretrial Negotiation," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 93-108.
    2. Mercedes Ayuso & Lluís Bermúdez & Miguel Santolino, 2012. "Influence of parties' behavioural features on motor compensation disputes in insurance markets," Journal of Risk Research, Taylor & Francis Journals, vol. 15(6), pages 673-691, June.
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    Citations

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    Cited by:

    1. Samantha Bielen & Peter Grajzl & Wim Marneffe, 2017. "Understanding the Time to Court Case Resolution: A Competing Risks Analysis Using Belgian Data," CESifo Working Paper Series 6450, CESifo Group Munich.
    2. Peter Grajzl & Katarina Zajc, 2017. "Litigation and the timing of settlement: evidence from commercial disputes," European Journal of Law and Economics, Springer, vol. 44(2), pages 287-319, October.
    3. Bielen, Samantha & Grajzl, Peter & Marneffe, Wim, 2017. "Procedural events, judge characteristics, and the timing of settlement," International Review of Law and Economics, Elsevier, vol. 52(C), pages 97-110.

    More about this item

    Keywords

    Litigation; Uncertainty; Cumulative incidence function; Settlement delay; Private information; Mediation;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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