Settlements under unequal access to justice

A settlement among conflicting parties is usually regarded as an efficient solution to a judicial dispute, but settlements between the rich and the poor can also be a symptom of unequal access to justice. We develop a model of settlements that takes wealth disparity between the parties into account, as the defendant and the victim must exert costly effort in court. Richer litigants can drive a harder bargain, and achieve a more favorable settlement price (the price effect), but so can poorer litigants if they have connections or know the judicial system better, e.g., police officers. We provide empirical evidence consistent with the price effect using data on criminal traffic offenses in Russia, where the process allows for civil-style victim-defendant settlements. In line with the theoretical prediction, we find that law enforcement officers and government officials settle more often as defendants (and less often as victims) than their comparable wealth group. Other potential reasons, like judicial bias, fail to explain these differences. The price effect highlights the failure of the judicial system to provide equal justice.