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The Appeal Decision and Settlement Bargaining

Author

Listed:
  • Ansgar Wohlschlegel

    (Swansea University)

Abstract

This paper analyses settlement bargaining under incomplete information when an appeal is possible. Litigants may engage in pretrial and, before reaching the appeals court, posttrial settlement bargaining. In the latter, both litigants utilise the information revealed at earlier stages, introducing the following effects: First, a defendant rejecting the pretrial settlement reveals having a strong case. Hence, a higher pretrial settlement rate weakens the plaintiff's average case, thereby reducing her posttrial equilibrium payoff (strategic effect). Second, the trial judgment is a noisy public signal of the appeals judgment. Hence, winning at trial makes a litigant stronger in posttrial settlement bargaining (information effect). Unlike in the standard single-stage model of settlement bargaining, I find that lower legal costs may not always reduce settlement incentives and that the allocation of legal costs between litigants may matter. Additionally, a stronger correlation between judgments on both court levels weakens the strategic effect.

Suggested Citation

  • Ansgar Wohlschlegel, 2025. "The Appeal Decision and Settlement Bargaining," Working Papers 2025-01, Swansea University, School of Management.
    • Handle: RePEc:swn:wpaper:2025-01
    as

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    File URL: https://rahwebdav.swan.ac.uk/repec/pdf/WP2025-01.pdf
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    References listed on IDEAS

    as
    1. Theodore Eisenberg, 2004. "Appeal Rates and Outcomes in Tried and Nontried Cases: Further Exploration of Anti‐Plaintiff Appellate Outcomes," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 1(3), pages 659-688, November.
    2. Butler, Monika & Hauser, Heinz, 2000. "The WTO Dispute Settlement System: First Assessment from an Economic Perspective," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 16(2), pages 503-533, October.
    3. Duol Kim & Heechul Min, 2017. "Appeal rate and caseload: evidence from civil litigation in Korea," European Journal of Law and Economics, Springer, vol. 44(2), pages 339-360, October.
    4. Tim Friehe & Ansgar Wohlschlegel, 2019. "Rent Seeking and Bias in Appeals Systems," The Journal of Legal Studies, University of Chicago Press, vol. 48(1), pages 117-157.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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