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Signaling, Learning and Screening Prior to Trial: A Theory of Preliminary Injunctions

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  • Thomas D. Jeitschko

    () (Department of Economics, Michigan State University)

  • Byung-Cheol Kim

    () (School of Economics, Georgia Institute of Technology)

Abstract

The decision to request a preliminary injunction-a court order that bans a party from certain behavior until its lawfulness is ascertained in a final court ruling at trial-is an important litigation instrument in many areas of the law including antitrust, copyright, patents, trademarks, employment and labor relations as well as contracts. The process of filing for a preliminary injunction and the court's ruling on such a request generates information that can affect possible settlement decisions. We consider these implications when there is uncertainty about both the plaintiff’s damages as well as the merits of case in the eyes of the court. Both plaintiff and defendant revise their beliefs about the case strength in dispute once they observe the court's ruling on preliminary injunctive relief. We study how such learning affects the likelihood of settlement. A precursor to this analysis is the study of the strategic role of preliminary injunctions as a means to signal the plaintiff's willingness to settle.

Suggested Citation

  • Thomas D. Jeitschko & Byung-Cheol Kim, 2009. "Signaling, Learning and Screening Prior to Trial: A Theory of Preliminary Injunctions," Royal Holloway, University of London: Discussion Papers in Economics 09/11, Department of Economics, Royal Holloway University of London.
  • Handle: RePEc:hol:holodi:0911
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    Keywords

    preliminary injunction; learning; signaling; screening; litigation; settlement.;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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