Confidence, Optimism and Litigation: A Litigation Model under Ambiguity
This paper introduces ambiguity into an otherwise standard litigation model. The aim is to take into account optimism and confidence on the plaintiff side. We examine the following questions : 1) How optimism and confidence affect the outcomes of the settlement stage? 2) How optimism and confidence affect the level of care? 3) As a result what are the public policy implications in terms of monitoring the level of confidence? We show that the equilibrium probability of settlement is increasing in the degree of optimism for every plaintiffs and increasing in the level of confidence for pessimistic plaintiffs, provided the sensitivity of plaintiffs to a rise in the settlement offer is high, and that the same holds for the level of care independently of the sensitivity of plaintiffs to rises in the settlement offer. Finally, assuming the objective of the government is to minimize the probability of litigation and assuming that it can only manipulate the level of confidence, we find that a clear recommendation is possible only in the case of a high sensitivity of plaintiffs to rises in the settlement offer: government intervention to raise public confidence in the judicial system is recommended only when plaintiffs are pessimistic about their chances of winning and in that case, as much as possible should be spent.
|Date of creation:||May 2013|
|Date of revision:|
|Contact details of provider:|| Postal: 45 D Avenue de l'observatoire, 25030 Besançon cedex|
Phone: 03 81 66 65 80
Fax: 03 81 66 65 76
Web page: http://crese.univ-fcomte.fr/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christine Jolls & Cass R. Sunstein, 2006.
"Debiasing through Law,"
The Journal of Legal Studies,
University of Chicago Press, vol. 35(1), pages 199-242, 01.
- Chateauneuf, Alain & Eichberger, Jürgen & Grant, Simon, 2003.
"Choice under uncertainty with the best and worst in mind : neo-additive capacities,"
03-10, Sonderforschungsbreich 504.
- Chateauneuf, Alain & Eichberger, Jurgen & Grant, Simon, 2007. "Choice under uncertainty with the best and worst in mind: Neo-additive capacities," Journal of Economic Theory, Elsevier, vol. 137(1), pages 538-567, November.
- Grant, Simon & Chateauneuf, A. & Eichberger, J., 2002. "Choice under Uncertainty with the Best and Worst in Mind: Neo-additive Capacities," Working Papers 2002-10, Rice University, Department of Economics.
- Chateauneuf, Alain & Eichberger, Jürgen & Grant, Simon, 2003. "Choice under Uncertainty with the Best and Worst in Mind: Neo-additive Capacities," Sonderforschungsbereich 504 Publications 03-10, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Alain Chateauneuf & Jürgen Eichberger & Simon Grant, 2007. "Choice under uncertainty with the best and worst in mind: neo-additive capacities," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00271279, HAL.
- Johanna Etner & Meglena Jeleva & Jean‐Marc Tallon, 2012.
"Decision Theory Under Ambiguity,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 26(2), pages 234-270, 04.
- Schmeidler, David, 1989.
"Subjective Probability and Expected Utility without Additivity,"
Econometric Society, vol. 57(3), pages 571-87, May.
- David Schmeidler, 1989. "Subjective Probability and Expected Utility without Additivity," Levine's Working Paper Archive 7662, David K. Levine.
- 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.
- Babcock, Linda, et al, 1995. "Biased Judgments of Fairness in Bargaining," American Economic Review, American Economic Association, vol. 85(5), pages 1337-43, December.
- Gilboa, Itzhak & Schmeidler, David, 1989.
"Maxmin expected utility with non-unique prior,"
Journal of Mathematical Economics,
Elsevier, vol. 18(2), pages 141-153, April.
- Waldfogel, Joel, 1998.
"Reconciling Asymmetric Information and Divergent Expectations Theories of Litigation,"
Journal of Law and Economics,
University of Chicago Press, vol. 41(2), pages 451-76, October.
- Joel Waldfogel, 1998. "Reconciling Asymmetric Information and Divergent Expectations Theories of Litigation," NBER Working Papers 6409, National Bureau of Economic Research, Inc.
- Claudia M. Landeo & Maxim Nikitin & Sergei Izmalkov, 2013. "Incentives for care, litigation, and tort reform under self-serving bias," Chapters, in: Research Handbook on Economic Models of Law, chapter 6, pages 112-155 Edward Elgar Publishing.
- Farmer, Amy & Pecorino, Paul, 2002. "Pretrial bargaining with self-serving bias and asymmetric information," Journal of Economic Behavior & Organization, Elsevier, vol. 48(2), pages 163-176, June.
- Linda Babcock & George Loewenstein, 1997. "Explaining Bargaining Impasse: The Role of Self-Serving Biases," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 109-126, Winter.
- 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.
- Joshua C. Teitelbaum, 2007. "A Unilateral Accident Model under Ambiguity," The Journal of Legal Studies, University of Chicago Press, vol. 36(2), pages 431-477, 06.
When requesting a correction, please mention this item's handle: RePEc:crb:wpaper:2013-05. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian At)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.