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Litigation Selection as a Signal under Asymmetric Information: A Two-Type Model with Alternating Bargaining Offers

Author

Listed:
  • Kim, Iljoong
  • Kim, Jaehong

Abstract

This paper studies the signaling role of the litigation/settlement selection under asymmetric information. As an attempt to improve existing asymmetric information theory, we separate litigation/settlement selection process and the actual settlement bargaining process, and adopt an infinitely repeated settlement bargaining with alternating offers, instead of the extreme 'take-it-or-leave-it' offer which has been frequently assumed in current literature. Upon the explicit derivation of the sequential equilibria, we interpret heuristically the role of asymmetric information in litigation selection, and provide comprehensive comparative static analyses for more concrete empirical testing of asymmetric information theory.

Suggested Citation

  • Kim, Iljoong & Kim, Jaehong, 2000. "Litigation Selection as a Signal under Asymmetric Information: A Two-Type Model with Alternating Bargaining Offers," Discussion Paper Series a400, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:hituec:a400
    Note: Bibliography: p. 17
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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/13856/1/DP400.pdf
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    More about this item

    Keywords

    asymmetric information; signaling; litigation; settlement; win rate;

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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