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Keeping Society in the Dark: On the Admissibility of Pretrial Negotiations As Evidence in Court

  • Andrew F. Daughety


  • Jennifer F. Reinganum

    (Univ. of Iowa)

We model the settlement and litigation process, allowing for incomplete information about the level of damages (incurred by the plaintiff) on the part of both the defendant and the court, and use the model to examine the effect of making (currently inadmissible) settlement demands admissible as evidence in court should a case proceed to trial. Two conclusions emerge. First, admissibility rules have efficiency consequences: making a pretrial demand admissible would increase the expected number of cases that go to trial. Second, such rules have distributional consequences and need not benefit all parties to a controversy. As an example, in product liability cases consumers are likely to favor inadmissibility, while corporations will favor the reverse.

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Paper provided by EconWPA in its series Game Theory and Information with number 9403008.

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Length: 40 pages
Date of creation: 31 Mar 1994
Date of revision:
Handle: RePEc:wpa:wuwpga:9403008
Note: Zipped using PKZIP v2.04, encoded using UUENCODE v5.15. Zipped file includes 1 file -- Admissbl.fnl (body in WP5.1, 40 pages)
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  1. Steven Shavell, 1989. "Sharing of Information Prior to Settlement or Litigation," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 183-195, Summer.
  2. Robert Gertner & Robert Gibbons & David Scharfstein, 1987. "Simultaneous Signaling to the Capital and Product Markets," Working papers 449, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Spier, Kathryn E, 1992. "The Dynamics of Pretrial Negotiation," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 93-108, January.
  4. Lucian Arye Bebchuk, 1984. "Litigation and Settlement under Imperfect Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 404-415, Autumn.
  5. Schweizer, Urs, 1989. "Litigation and Settlement under Two-Sided Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 163-77, April.
  6. Steven Shavell, 1981. "Suit and Settlement vs. Trial: A Theoretical Analysis under Alternative Methods for the Allocation of Legal Costs," NBER Working Papers 0662, National Bureau of Economic Research, Inc.
  7. Daniel L. Rubinfeld & David E.M. Sappington, 1987. "Efficient Awards and Standards of Proof in Judicial Proceedings," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 308-315, Summer.
  8. 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.
  9. George L. Priest & Benjamin Klein, 1984. "The Selection of Disputes for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 13(1), pages 1-56, January.
  10. Farrell, Joseph & Gibbons, Robert, 1989. "Cheap Talk with Two Audiences," American Economic Review, American Economic Association, vol. 79(5), pages 1214-23, December.
  11. I.P.L. P'ng, 1983. "Strategic Behavior in Suit, Settlement, and Trial," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 539-550, Autumn.
  12. Barry Nalebuff, 1987. "Credible Pretrial Negotiation," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 198-210, Summer.
  13. Polinsky, A. Mitchell & Rubinfeld, Daniel L., 1988. "The deterrent effects of settlements and trials," International Review of Law and Economics, Elsevier, vol. 8(1), pages 109-116, June.
  14. 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.
  15. Daughety, A. & Reinganum, J., 1991. "Endogenous Sequencing in Models of Settlement and Litigation," Working Papers 91-23, University of Iowa, Department of Economics.
  16. Gerald D. Gay & Martin F. Grace & Jayant R. Kale & Thomas H. Noe, 1989. "Noisy Juries and the Choice of Trial Mode in a Sequential Signalling Game: Theory and Evidence," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 196-213, Summer.
  17. Salant, Stephen W., 1984. "Litigation of Settlement Demands Questioned by Bayesian Defendants," Working Papers 516, California Institute of Technology, Division of the Humanities and Social Sciences.
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