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Keeping Society in the Dark: On the Admissibility of Pretrial Negotiations as Evidence in Court

  • Andrew F. Daughety
  • Jennifer F. Reinganum

We model the settlement and litigation process, allowing for incomplete information about the level of damages on the part of both the defendant and the court, and use the model to examine the effect of making (currently inadmissible) settlement demands admissible as evidence in court should a case proceed to trial. Two conclusion emerge. First, admissibility rules have efficiency consequences: making a pretrial demand admissible would increase the expected number of cases that go to trial. Second, such rules have distributional consequences and need not benefit all parties to a controversy.

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Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 26 (1995)
Issue (Month): 2 (Summer)
Pages: 203-221

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Handle: RePEc:rje:randje:v:26:y:1995:i:summer:p:203-221
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  1. Gerald D. Gay & Martin F. Grace & Jayant R. Kale & Thomas H. Noe, 1989. "Noisy Juries and the Choice of Trial Mode in a Sequential Signalling Game: Theory and Evidence," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 196-213, Summer.
  2. Farrell, J. & Gibbons, R., 1989. "Cheap Talk With Two Audiences," Working papers 518, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Daughety, Adnrew F & Reinganum, Jennifer F, 1993. "Endogenous Sequencing in Models of Settlement and Litigation," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(2), pages 314-48, October.
  4. Spier, Kathryn E, 1992. "The Dynamics of Pretrial Negotiation," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 93-108, January.
  5. Landes, William M, 1971. "An Economic Analysis of the Courts," Journal of Law and Economics, University of Chicago Press, vol. 14(1), pages 61-107, April.
  6. Gertner, Robert H. & Gibbons, Robert. & Scharfstein, David., 1987. "Simultaneous signaling to the capital and product markets," Working papers 1917-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  7. 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.
  8. Schweizer, Urs, 1989. "Litigation and Settlement under Two-Sided Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 163-77, April.
  9. Barry Nalebuff, 1987. "Credible Pretrial Negotiation," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 198-210, Summer.
  10. Daniel L. Rubinfeld & David E.M. Sappington, 1987. "Efficient Awards and Standards of Proof in Judicial Proceedings," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 308-315, Summer.
  11. Lucian Arye Bebchuk, 1984. "Litigation and Settlement under Imperfect Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 404-415, Autumn.
  12. Steven Shavell, 1981. "Suit and Settlement vs. Trial: A Theoretical Analysis under Alternative Methods for the Allocation of Legal Costs," NBER Working Papers 0662, National Bureau of Economic Research, Inc.
  13. Steven Shavell, 1989. "Sharing of Information Prior to Settlement or Litigation," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 183-195, Summer.
  14. Jennifer F. Reinganum & Louise L. Wilde, 1986. "Settlement, Litigation, and the Allocation of Litigation Costs," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 557-566, Winter.
  15. Salant, Stephen W., 1984. "Litigation of Settlement Demands Questioned by Bayesian Defendants," Working Papers 516, California Institute of Technology, Division of the Humanities and Social Sciences.
  16. Polinsky, A. Mitchell & Rubinfeld, Daniel L., 1988. "The deterrent effects of settlements and trials," International Review of Law and Economics, Elsevier, vol. 8(1), pages 109-116, June.
  17. George L. Priest & Benjamin Klein, 1984. "The Selection of Disputes for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 13(1), pages 1-56, January.
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