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Demand for Artificial Intelligence in Settlement Negotiations

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  • Joshua S. Gans

Abstract

When AI prediction substantially resolves trial uncertainty, a party purchasing AI prediction will disclose it if it is in their favour and not otherwise, signalling the outcome to the other party. Thus, the trial outcome becomes common knowledge. However, this implies that the parties will settle rather than purchase the AI prediction. When parties have differing prior beliefs regarding trial outcomes, these differences are only resolved if the AI prediction is purchased and utilised. In this case, AI will be purchased in equilibrium. Different trial cost allocation rules awarding all costs to the losing party (the English Rule) or having each party bear their own costs (the American Rule) can impact the demand for AI for settlement negotiations, but how this occurs interacts with the expectations regarding whether a settlement will occur or not in AI's absence.

Suggested Citation

  • Joshua S. Gans, 2024. "Demand for Artificial Intelligence in Settlement Negotiations," NBER Working Papers 32685, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32685
    Note: LE PR
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    More about this item

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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