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Inferences from Litigated Cases

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  • Daniel Klerman
  • Yoon-Ho Alex Lee

Abstract

Priest and Klein argued in 1984 that, because of selection effects, the percentage of litigated cases won by plaintiffs will not vary with the legal standard. Many researchers thereafter concluded that one could not make valid inferences about the character of the law from the percentage of cases plaintiffs won, nor could one measure legal change by observing changes in that percentage. This article argues that, even taking selection effects into account, one may be able to make valid inferences from the percentage of plaintiff trial victories, because selection effects are partial. Therefore, although selection mutes changes in the plaintiff trial win rate, it does not make the win rate completely invariant to legal change. This article shows that inferences from litigated cases may be possible under the standard screening and signaling models of settlement, as well as under Priest and Klein's original divergent-expectations model.

Suggested Citation

  • Daniel Klerman & Yoon-Ho Alex Lee, 2014. "Inferences from Litigated Cases," The Journal of Legal Studies, University of Chicago Press, vol. 43(2), pages 209-248.
  • Handle: RePEc:ucp:jlstud:doi:10.1086/678236
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    References listed on IDEAS

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    1. Waldfogel, Joel, 1995. "The Selection Hypothesis and the Relationship between Trial and Plaintiff Victory," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 229-260, April.
    2. Daniel Friedman & Donald Wittman, 2007. "Litigation with Symmetric Bargaining and Two-Sided Incomplete Information," Journal of Law, Economics, and Organization, Oxford University Press, vol. 23(1), pages 98-126, April.
    3. Hylton, Keith N, 1993. "Asymmetric Information and the Selection of Disputes for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 22(1), pages 187-210, January.
    4. Kessler, Daniel & Meites, Thomas & Miller, Geoffrey P, 1996. "Explaining Deviations from the Fifty-Percent Rule: A Multimodal Approach to the Selection of Cases for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 25(1), pages 233-259, January.
    5. Shavell, Steven, 1996. "Any Frequency of Plaintiff Victory at Trial Is Possible," The Journal of Legal Studies, University of Chicago Press, vol. 25(2), pages 493-501, June.
    6. Bernardo, Antonio E & Talley, Eric & Welch, Ivo, 2000. "A Theory of Legal Presumptions," Journal of Law, Economics, and Organization, Oxford University Press, vol. 16(1), pages 1-49, April.
    7. Priest, George L, 1987. "Measuring Legal Change," Journal of Law, Economics, and Organization, Oxford University Press, vol. 3(2), pages 193-225, Fall.
    8. Barry Nalebuff, 1987. "Credible Pretrial Negotiation," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 198-210, Summer.
    9. Ashenfelter, Orley & Eisenberg, Theodore & Schwab, Stewart J, 1995. "Politics and the Judiciary: The Influence of Judicial Background on Case Outcomes," The Journal of Legal Studies, University of Chicago Press, vol. 24(2), pages 257-281, June.
    10. 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.
    11. 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.
    12. Siegelman, Peter & Donohue, John J, III, 1995. "The Selection of Employment Discrimination Disputes for Litigation: Using Business Cycle Effects to Test the Priest-Klein Hypothesis," The Journal of Legal Studies, University of Chicago Press, vol. 24(2), pages 427-462, June.
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    1. repec:kap:copoec:v:28:y:2017:i:4:d:10.1007_s10602-017-9235-0 is not listed on IDEAS
    2. M. Todd Henderson & William H. J. Hubbard, 2015. "Judicial Noncompliance with Mandatory Procedural Rules under the Private Securities Litigation Reform Act," The Journal of Legal Studies, University of Chicago Press, vol. 44(S1), pages 87-105.
    3. Freyens, Benoit Pierre & Gong, Xiaodong, 2015. "Dismissal Laws in Australia: Reforms and Enforcement by Labour Courts," IZA Discussion Papers 9295, Institute for the Study of Labor (IZA).
    4. Lee, Yoon-Ho Alex & Klerman, Daniel, 2016. "The Priest-Klein hypotheses: Proofs and generality," International Review of Law and Economics, Elsevier, vol. 48(C), pages 59-76.
    5. Jonah B. Gelbach, 2015. "The Sheriff of Nottingham Hypothesis: A Tribute to Theodore Eisenberg," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 171(1), pages 141-144, March.
    6. Freyens, Benoit Pierre & Gong, Xiaodong, 2017. "Judicial decision making under changing legal standards: The case of dismissal arbitration," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 108-126.
    7. Christoph Engel & Urs Schweizer, 2015. "Does the Law Deliver? 32nd International Seminar on the New Institutional Economics June 11-14, 2014, Regensburg, Germany," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 171(1), pages 1-5, March.

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