The Effect of Offer-of-Settlement Rules on the Terms of Settlement
Under an offer of settlement' rule, a party to a lawsuit may make a special offer to settle with the other party, such that if the other party rejects this offer, then this offer (unlike an ordinary offer) becomes part of the record in the case and may affect the allocation of litigation costs. Specifically, if the parties litigate to judgment, then the allocation of litigation costs may depend on how the judgment compares with the special offer. This paper develops a model of bargaining under offer-of-settlement rules that can be used to analyze the effect that such rules have on the terms of settlement. The analysis first sets forth a general principle that identifies the settlement amount under any such rule. We then apply this principle to derive the settlement terms under the most important of these rules, and we identify a large set of seemingly different rules that produce identical settlements. Our results have both positive and normative implications.
|Date of creation:||May 2000|
|Date of revision:|
|Publication status:||published as Journal of Legal Studies, vol. 28, no. 2, pp. 489-513, 1999.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
252, David K. Levine.
- Lucian Arye Bebchuk, 1984. "Litigation and Settlement under Imperfect Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 404-415, Autumn.
- Kathryn E. Spier, 1994. "Pretrial Bargaining and the Design of Fee-Shifting Rules," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 197-214, Summer.
- Chung, Tai-Yeong, 1996. "Settlement of Litigation under Rule 68: An Economic Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 25(1), pages 261-86, January.
- Anderson, David A, 1994. "Improving Settlement Devices: Rule 68 and Beyond," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 225-46, January.
- Jennifer F. Reinganum & Louise L. Wilde, 1986. "Settlement, Litigation, and the Allocation of Litigation Costs," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 557-566, Winter.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:6509. 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: ()
If references are entirely missing, you can add them using this form.