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Discovery and Disclosure with Asymmetric Information and Endogenous Expenditure at Trial

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  • Amy Farmer
  • Paul Pecorino

Abstract

We develop a model with asymmetric information, in which the uninformed party makes the offer. When the parties proceed to trial, their endogenous expenditures partially determine the outcome. The endogenous spending at trial can either strengthen or weaken the bargaining position of the uninformed party with the player types who settle. When the bargaining position is strengthened, some standard results on information transmission prior to trial may be overturned. The recipient of the offer with a weak case may make a costly voluntary disclosure. In addition, the party making the offer may refuse costless discovery. Both of these results contrast with the standard results in the literature derived from models in which spending at trial is treated as exogenous.

Suggested Citation

  • Amy Farmer & Paul Pecorino, 2013. "Discovery and Disclosure with Asymmetric Information and Endogenous Expenditure at Trial," The Journal of Legal Studies, University of Chicago Press, vol. 42(1), pages 223-247.
  • Handle: RePEc:ucp:jlstud:doi:10.1086/667932
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    References listed on IDEAS

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    Cited by:

    1. repec:elg:eechap:15325_17 is not listed on IDEAS
    2. Jonah B. Gelbach, 2016. "Can Simple Mechanism Design Results be Used to Implement the Proportionality Standard in Discovery?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(1), pages 200-221, March.
    3. 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.

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