IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Forming Beliefs about Adjudicated Outcomes: Risk Attitudes, Uncertainty, and Reservation Values

Listed author(s):
  • Linda Babcock

    (Carnegie Mellon University)

  • Henry S. Farber

    (Princeton University)

  • Cynthia Fobian

    (Starr Litigation Services)

  • Eldar Shafir

    (Princeton University)

Registered author(s):

    In negotiations where disputes are resolved via adjudication (as in the courts or arbitration), beliefs about a potential adjudicated outcome are central in determining the bargaining environment. The present research investigates how negotiators (trial attorneys and students) involved in a hypothetical product liability case use information about adjudicated outcomes regarding the amount of damages in previous similar cases in forming beliefs about their own case. In particular, we examine how the parameters of the distribution of previous outcomes (variance and range) contribute to the differences between the expected outcome and the parties' reservation values. We find that the range of earlier outcomes has no significant effect on subjects' reservation values but that the variance does have a systematic effect, particularly on plaintiffs' behavior. A pair of separate findings may have important implications for the negotiation process. First, whether or not subjects exhibited risk averse behavior depended on the role to which they were assigned in a way that is consistent with the risk attitudes and framing notion implied by Kahneman and Tversk's prospect theory (1979). Second, only subjects assigned to roles for which they had extensive experience exhibited over-optimism about the likely outcome.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 704.

    in new window

    Date of creation: Jan 1994
    Handle: RePEc:pri:indrel:325
    Contact details of provider: Postal:
    Firestone Library, Princeton, New Jersey 08544-2098

    Phone: 609 258-4041
    Fax: 609 258-2907
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:pri:indrel:325. 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: (Bobray Bordelon)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.