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Signaling, Learning, and Screening Prior to Trial: Informational Implications of Preliminary Injunctions

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  • Thomas D. Jeitschko
  • Byung-Cheol Kim

Abstract

Preliminary injunctions (PIs) are important in litigation in many settings, including antitrust, copyright, patent, trademark, employment and labor relations, and contracts. The filing of a PI and the court's ruling generate information that can impact settlement. We find that some plaintiffs request a PI to signal bounds on their damages in order to elicit better settlement offers. As a result, the parties are more likely to come to an out-of-court agreement permitting the disputed activity, compared to when a PI is motivated solely by defensive reasons to avert immediate damages during trial. Although the grant of a PI reduces ex post incentives for potential litigants to settle, this is more than offset by an increase in settlement upon a denial. Thus, ex ante, learning leads to more settlement. Nevertheless, the anticipation of learning and increased chances of settlement do not affect the initial filing decision. The Author 2012. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oup.com, Oxford University Press.

Suggested Citation

  • Thomas D. Jeitschko & Byung-Cheol Kim, 2013. "Signaling, Learning, and Screening Prior to Trial: Informational Implications of Preliminary Injunctions," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(5), pages 1085-1113, October.
    • Handle: RePEc:oup:jleorg:v:29:y:2013:i:5:p:1085-1113
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    Cited by:

    1. Andrew F. Daughety & Reinganum F. Reinganum, 2014. "Settlement and Trial: Selected Analyses of the Bargaining Environment," Vanderbilt University Department of Economics Working Papers 14-00005, Vanderbilt University Department of Economics.
    2. Shaun Larcom & Mare Sarr, 2018. "On the Perils of Commitment to Punishment when Criminals Are Strategic," The Journal of Legal Studies, University of Chicago Press, vol. 47(2), pages 391-418.

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    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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