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Costly Evidence Production and the Limits of Verifiability

  • Jesse Bull

    ()

    (Department of Economics, Florida International University)

This paper explores the limits of "verifiability" induced by the process of costly evidence production in contractual relationships of complete information. I study how the cost of providing evidence (disclosing documents) influences the set of enforceable contracts. I show that evidence cost can be both beneficial and detrimental with regard to enlarging the set of settlement outcomes that can be implemented. Further, I study how what can be considered verifiable is influenced by parties’ incentives to produce evidence and by the particular evidence cost structure. My analysis includes the opportunity for contracting parties to renegotiate (or settle) prior to the enforcement phase. I also study how the availability of redundant documents expands the set of enforceable contracts, and discuss the relevance of my findings to the design of legal institutions.

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File URL: http://casgroup.fiu.edu/pages/docs/2244/1275230187_06-11.pdf
File Function: Revised version, 2006
Download Restriction: no

Paper provided by Florida International University, Department of Economics in its series Working Papers with number 0611.

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Length: 30 pages
Date of creation: Sep 2006
Date of revision:
Handle: RePEc:fiu:wpaper:0611
Contact details of provider: Postal: Miami, FL 33199
Phone: (305) 348-2316
Fax: (305) 348-1524
Web page: http://casgroup.fiu.edu/Economics/

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  1. Shepherd, George B., 1999. "An empirical study of the economics of pretrial discovery," International Review of Law and Economics, Elsevier, vol. 19(2), pages 245-263, June.
  2. Shin, Hyun Song, 1997. "Adversarial and Inquisitorial Procedures in Arbitration," CEPR Discussion Papers 1722, C.E.P.R. Discussion Papers.
  3. Antonio Bernardo & Eric L. Talley & Ivo Welch, 1999. "A Theory of Legal Presumptions," Yale School of Management Working Papers ysm118, Yale School of Management.
  4. Steven Shavell, 1989. "Sharing of Information Prior to Settlement or Litigation," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 183-195, Summer.
  5. Bull, Jesse & Watson, Joel, 2004. "Evidence disclosure and verifiability," Journal of Economic Theory, Elsevier, vol. 118(1), pages 1-31, September.
  6. Gong, Jiong & McAfee, R Preston, 2000. "Pretrial Negotiation, Litigation, and Procedural Rules," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 218-38, April.
  7. Okuno-Fujiwara, Masahiro & Postlewaite, Andrew & Suzumura, Kotaro, 1990. "Strategic Information Revelation," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 25-47, January.
  8. Joel Watson & Jesse Bull, 2004. "Hard Evidence and Mechanism Design," Econometric Society 2004 North American Winter Meetings 433, Econometric Society.
  9. Chris Sanchirico & George Triantis, . "Evidentiary Arbitrage: The Fabrication of Evidence and The Verifiability of Contract Performance," University of Virginia John M. Olin Program for Law & Economics Working Paper Series uvalwps-1011, University of Virginia School of Law.
  10. Evans, R., 2006. "Mechanism Design with Renegotiation and Costly Messages," Cambridge Working Papers in Economics 0626, Faculty of Economics, University of Cambridge.
  11. Eric Maskin & John Moore, 1998. "Implementation and renegotiation," LSE Research Online Documents on Economics 19350, London School of Economics and Political Science, LSE Library.
  12. Froeb, Luke M. & Kobayashi, Bruce H., 2001. "Evidence production in adversarial vs. inquisitorial regimes," Economics Letters, Elsevier, vol. 70(2), pages 267-272, February.
  13. Daniel L. Rubinfeld & David E.M. Sappington, 1987. "Efficient Awards and Standards of Proof in Judicial Proceedings," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 308-315, Summer.
  14. Alan Schwartz & Joel Watson, . "The Law and Economics of Costly Contracting," Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy Working Paper Series yale_lepp-1004, Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy.
  15. Bull Jesse, 2008. "Mechanism Design with Moderate Evidence Cost," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 8(1), pages 1-20, May.
  16. Cooter, Robert D & Rubinfeld, Daniel L, 1994. "An Economic Model of Legal Discovery," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 435-63, January.
  17. Cooter, Robert D & Rubinfeld, Daniel L, 1989. "Economic Analysis of Legal Disputes and Their Resolution," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1067-97, September.
  18. Deneckere,R. & Severinov,S., 2001. "Mechanism design and communication costs," Working papers 23, Wisconsin Madison - Social Systems.
  19. repec:cdl:ucsdec:540003 is not listed on IDEAS
  20. Daughety, Andrew F & Reinganum, Jennifer F, 2000. "On the Economics of Trials: Adversarial Process, Evidence, and Equilibrium Bias," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(2), pages 365-94, October.
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