IDEAS home Printed from https://ideas.repec.org/p/geo/guwopa/gueconwpa~18-18-11.html
   My bibliography  Save this paper

Costly Pre-Trial Agreements

Author

Abstract

Settling a legal dispute involves some costs that the parties have to incur ex-ante, for the pretrial negotiation and possible agreement to become feasible. Even in a full information world, if the distribution of these costs is sufficiently mismatched with the distribution of the parties' bargaining powers, a pretrial agreement may never be reached even though actual Court litigation is overall wasteful. Our results shed light on two key issues. First, a Plaintiff may initiate a lawsuit even though the parties fully anticipate that it will be settled out of Court. Second, the "likelihood" that a given lawsuit ends up in Court is unaffected by how trial costs are distributed among the litigants. The choice of fee-shifting rule can only affect whether the Plaintiff files a lawsuit in the first place. It does not affect whether it is settled before trial or litigated in Court.

Suggested Citation

  • Luca Anderlini & Leonardo Felli & Giovanni Immordino, 2018. "Costly Pre-Trial Agreements," Working Papers gueconwpa~18-18-11, Georgetown University, Department of Economics.
  • Handle: RePEc:geo:guwopa:gueconwpa~18-18-11
    as

    Download full text from publisher

    File URL: http://faculty.georgetown.edu/la2/Pretrial.pdf
    File Function: Full text
    Download Restriction: None

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kathryn E. Spier, 1992. "The Dynamics of Pretrial Negotiation," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 93-108.
    2. Chopard, Bertrand & Cortade, Thomas & Langlais, Eric, 2010. "Trial and settlement negotiations between asymmetrically skilled parties," International Review of Law and Economics, Elsevier, vol. 30(1), pages 18-27, March.
    3. Luca Anderlini & Leonardo Felli, 2006. "Transaction Costs and the Robustness of the Coase Theorem," Economic Journal, Royal Economic Society, vol. 116(508), pages 223-245, January.
    4. Andrew F. Daughety & Jennifer F. Reinganum, 2011. "A dynamic model of lawsuit joinder and settlement," RAND Journal of Economics, RAND Corporation, vol. 42(3), pages 471-494, September.
    5. Hughes, James W & Snyder, Edward A, 1995. "Litigation and Settlement under the English and American Rules: Theory and Evidence," Journal of Law and Economics, University of Chicago Press, vol. 38(1), pages 225-250, April.
    6. Snyder, Edward A & Hughes, James W, 1990. "The English Rule for Allocating Legal Costs: Evidence Confronts Theory," Journal of Law, Economics, and Organization, Oxford University Press, vol. 6(2), pages 345-380, Fall.
    7. Gong, Jiong & McAfee, R Preston, 2000. "Pretrial Negotiation, Litigation, and Procedural Rules," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 218-238, April.
    8. Barry Nalebuff, 1987. "Credible Pretrial Negotiation," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 198-210, Summer.
    9. William M. Landes, 1974. "An Economic Analysis of the Courts," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 164-214 National Bureau of Economic Research, Inc.
    10. Froeb, Luke M & Kobayashi, Bruce H, 1996. "Naive, Biased, Yet Bayesian: Can Juries Interpret Selectively Produced Evidence?," Journal of Law, Economics, and Organization, Oxford University Press, vol. 12(1), pages 257-276, April.
    11. Schmitz, Patrick W., 2016. "The negotiators who knew too much: Transaction costs and incomplete information," Economics Letters, Elsevier, vol. 145(C), pages 33-37.
    12. Lucian Arye Bebchuk, 1984. "Litigation and Settlement under Imperfect Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 404-415, Autumn.
    13. Plott, Charles R, 1987. "Legal Fees: A Comparison of the American and English Rules," Journal of Law, Economics, and Organization, Oxford University Press, vol. 3(2), pages 185-192, Fall.
    14. 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 1067-1097, September.
    15. Urs Schweizer, 1989. "Litigation and Settlement under Two-Sided Incomplete Information," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 163-177.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Müller, Daniel & Schmitz, Patrick W., 2017. "Optimal ownership of public goods in the presence of transaction costs," Economics Letters, Elsevier, vol. 152(C), pages 88-92.

    More about this item

    Keywords

    Pre-Trial Agreements; Costly Negotiation; Court Litigation;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:geo:guwopa:gueconwpa~18-18-11. 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: (Marcia Suss). General contact details of provider: http://econ.georgetown.edu/ .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.