Costly pretrial agreements

Anderlini, Luca, Felli, Leonardo and Immordino, Giovanni (2019) Costly pretrial agreements. Journal of Legal Studies, 48 (1). 159 - 188. ISSN 0047-2530

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Abstract

Settling a legal dispute involves some costs that the parties have to incur ex ante for the pretrial negotiation and possible agreement to become feasible. Even in a full-information world, if the distribution of these costs is sufficiently mismatched with the distribution of the parties’ bargaining powers, a pretrial agreement may never be reached even though litigation is overall wasteful. Our results shed light on two key issues. First, a plaintiff may initiate a lawsuit even though the parties fully anticipate that it will be settled out of court. Second, the likelihood that a given lawsuit goes to trial is unaffected by how trial costs are distributed among the litigants. The choice of fee-shifting rule can affect only whether the plaintiff files a lawsuit in the first place. It does not affect whether it is settled before trial or litigated.

Item Type:	Article
Official URL:	https://www.journals.uchicago.edu/toc/jls/current
Additional Information:	© 2018 University of Chicago Press
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory K Law > K Law (General)
JEL classification:	C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C79 - Other D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory K - Law and Economics > K1 - Basic Areas of Law > K12 - Contract Law K - Law and Economics > K1 - Basic Areas of Law > K13 - Tort Law and Product Liability
Date Deposited:	16 Jul 2018 15:30
Last Modified:	11 Dec 2024 21:40
URI:	http://eprints.lse.ac.uk/id/eprint/89255

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