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Frivolous Suits In The Infinitely-Repeated Litigation Game With Uncertainty

Listed author(s):
  • KIM, ILJOONG
  • KIM, JAEHONG
Registered author(s):

    We explain why 'frivolous suits (FS)' occur particularly under complete information. Existing analyses such as the 'traditional' and the 'early-defense-cost' models are not fully robust in that they either drop the plaintiff's withdrawal option or rely on a restrictive assumption that the defendant loses immediately unless he early defends himself at high cost. We pursue a more generalized explanation. We offer an infinite-period litigation model with uncertainty which reflects the reality more consistently. We then show that FS can occur as a subgame perfect equilibrium since the defendant over the pre-trial stage may settle with FS to save future time and/or trial costs. We further demonstrate that FS can occur even under the British rule of fee shifting.

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/27196/1/HJeco0560100210.pdf
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    Article provided by Hitotsubashi University in its journal Hitotsubashi Journal of Economics.

    Volume (Year): 56 (2015)
    Issue (Month): 1 (June)
    Pages: 21-33

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    Handle: RePEc:hit:hitjec:v:56:y:2015:i:1:p:21-33
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    1. Bebchuk, Lucian Arye & Chang, Howard F, 1996. "An Analysis of Fee Shifting Based on the Margin of Victory: On Frivolous Suits, Meritorious Suits, and the Role of Rule 11," The Journal of Legal Studies, University of Chicago Press, vol. 25(2), pages 371-403, June.
    2. Rosenberg, D. & Shavell, S., 1985. "A model in which suits are brought for their nuisance value," International Review of Law and Economics, Elsevier, vol. 5(1), pages 3-13, June.
    3. Kaushik Basu, 2007. "Coercion, contract and the limits of the market," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 29(4), pages 559-579, December.
    4. Bebchuk, Lucian Arye, 1988. "Suing Solely to Extract a Settlement Offer," The Journal of Legal Studies, University of Chicago Press, vol. 17(2), pages 437-450, June.
    5. I.P.L. P'ng, 1983. "Strategic Behavior in Suit, Settlement, and Trial," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 539-550, Autumn.
    6. Cooter, Robert D & Rubinfeld, Daniel L, 1989. "Economic Analysis of Legal Disputes and Their Resolution," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1067-1097, September.
    7. Rosenberg, David & Shavell, Steven, 2006. "A solution to the problem of nuisance suits: The option to have the court bar settlement," International Review of Law and Economics, Elsevier, vol. 26(1), pages 42-51, March.
    8. Bebchuk, Lucian Arye, 1996. "A New Theory Concerning the Credibility and Success of Threats to Sue," The Journal of Legal Studies, University of Chicago Press, vol. 25(1), pages 1-25, January.
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