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Costly pretrial agreements

Anderlini, Luca, Felli, Leonardo and Immordino, Giovanni (2018) Costly pretrial agreements. Journal of Legal Studies. ISSN 0047-2530 (In Press)

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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 actual Court litigation is overall wasteful. Our results shed light on two key issues. First, a Plaintiff may initiate a law suit even though the parties fully anticipate that it will be settled out of Court. Second, the "likelihood" that a given law suit goes to trial is unaffected by how trial costs are distributed among the litigants. The choice of fee-shifting rule can only affect whether the Plaintiff files a law suit in the first place. It does not affect whether it is settled before trial or litigated in Court.

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
Sets: Departments > Economics
Date Deposited: 16 Jul 2018 15:30
Last Modified: 14 Jul 2019 23:02
URI: http://eprints.lse.ac.uk/id/eprint/89255

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