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Allocation of Legal Costs and Patent Litigation: A Cooperative Game Approach

  • Reiko Aoki

    (Department of Economics, State University of New York at Stony Brook)

  • Jin-Li Hu

    (Department of Industrial Economics, Tamkang University, Taiwan)

We compare the bargaining power of the patentee under American and English rules of legal costs allocation. Using the Nash Bargaining Game framework, we show that litigation can be a Pareto efficient outcome. The cooperative game framework allows us to examine how the institutional and market factors influence bargaining powers of plaintiff and defendant under different rules of legal cost allocation, free from assumptions on information and sequence of moves. The American rule renders the patentee more bargaining power when the legal system favors the defendant. An increase in damage reward raises bargaining power of the plaintiff and the settlement rate.

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Paper provided by EconWPA in its series Industrial Organization with number 9612001.

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Length: 35 pages
Date of creation: 13 Dec 1996
Date of revision:
Handle: RePEc:wpa:wuwpio:9612001
Note: Type of Document - postscript and pdf files; prepared on IBM PC ; to print on PostScript or any printer supported by Acrobat; pages: 35 ; figures: included
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  1. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, March.
  2. William M. Landes, 1974. "An Economic Analysis of the Courts," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 164-214 National Bureau of Economic Research, Inc.
  3. Hylton, Keith N, 1993. "Asymmetric Information and the Selection of Disputes for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 22(1), pages 187-210, January.
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