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Settlement Strategies

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  • Miceli, Thomas J

Abstract

Economic models of litigation and settlement assume either that the plaintiff and defendant bargain over the settlement amount or that one party makes a single, take-it-or-leave-it offer. This article examines the choice between these two strategies by the defendant, assuming that he is able to precommit to a single offer. The advantage of the take-it-or-leave-it strategy is that it saves on bargaining costs and prevents plaintiffs who accept the offer from negotiating a larger share of the surplus from settlement. The advantage of the bargaining strategy is that it allows the defendant to individualize the settlement amount, thereby increasing the settlement rate and saving trial costs. The article derives the conditions under which each strategy is cost minimizing. Copyright 1998 by the University of Chicago.

Suggested Citation

  • Miceli, Thomas J, 1998. "Settlement Strategies," The Journal of Legal Studies, University of Chicago Press, vol. 27(2), pages 473-481, June.
    • Handle: RePEc:ucp:jlstud:v:27:y:1998:i:2:p:473-81
    DOI: 10.1086/468028
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    Cited by:

    1. Stefan Wielenberg, 2001. "Strategisches Verhalten bei der Unternehmenssanierung durch außergerichtlichen Vergleich," Schmalenbach Journal of Business Research, Springer, vol. 53(6), pages 605-631, September.
    2. Roland Kirstein & Neil Rickman, 2004. ""Third Party Contingency" Contracts in Settlement and Litigation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(4), pages 555-575, December.

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