Treble Damages and the Incentive to Sue and Settle
We apply Png's (1983) model to antitrust suits to determine the effects of private suits on government suits and vice versa. In equilibrium, a defendant can probabilistically signal a strong case by not offering to settle. A violator's incentive to signal a strong case to deter a treble damage suit forces the government to pursue more trials than it would otherwise. Private plaintiffs are more likely to settle following a government suit than otherwise, but they win a trial with the same probability regardless of whether there was a previous government suit. Data on private suits support the latter two contentions.
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Volume (Year): 27 (1996)
Issue (Month): 4 (Winter)
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