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Negative Expected Value Suits

  • Lucian Arye Bebchuk

When the cost of a suit exceeds the expected judgment, will a potential plaintiff be able to extract any amount in settlement from the defendant? If so, what is the source of the plaintiff's ability to extract a settlement? This essay discusses existing theories as to why (and when) plaintiffs with negative-expected-value (NEV) suits can extract a settlement amount from the defendant. Among the theories discussed are ones that focus on informational issues and ones that focus on the way in which the parties' litigation costs are expected to be distributed over time.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6474.

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Date of creation: Mar 1998
Date of revision:
Publication status: published as The New Palgrave Dictionary of Economics and the Law (1998), pp. 551-554
Handle: RePEc:nbr:nberwo:6474
Note: LE
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  1. Landes, William M, 1971. "An Economic Analysis of the Courts," Journal of Law and Economics, University of Chicago Press, vol. 14(1), pages 61-107, April.
  2. Rosenberg, D. & Shavell, S., 1985. "A model in which suits are brought for their nuisance value," International Review of Law and Economics, Elsevier, vol. 5(1), pages 3-13, June.
  3. Lucian Arye Bebchuk, 1984. "Litigation and Settlement under Imperfect Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 404-415, Autumn.
  4. Bebchuk, Lucian Arye, 1996. "A New Theory Concerning the Credibility and Success of Threats to Sue," The Journal of Legal Studies, University of Chicago Press, vol. 25(1), pages 1-25, January.
  5. Lucian Arye Bebchuk, 1987. "Suing Solely to Extract a Settlement Offer," NBER Working Papers 2161, National Bureau of Economic Research, Inc.
  6. Miceli, Thomas J., 1993. "Optimal deterrence of nuisance suits by repeat defendants," International Review of Law and Economics, Elsevier, vol. 13(2), pages 135-144, June.
  7. Farmer, Amy & Pecorino, Paul, 1998. "A reputation for being a nuisance: frivolous lawsuits and fee shifting in a repeated play game," International Review of Law and Economics, Elsevier, vol. 18(2), pages 147-157, June.
  8. Landes, William M, 1993. "Sequential versus Unitary Trials: An Economic Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 22(1), pages 99-134, January.
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