Optimal litigation strategies with observable case preparation

• 成果类型: Article
• 署名作者: Chone, Philippe; Linnemer, Laurent
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2010.03.001
• 发表日期: 2010
• 页码: 271-288
• 关键词: Case preparation; settlement; TRIAL; signaling

摘要

This paper investigates the strategic effects of case preparation in litigation. Specifically, it shows how the pretrial efforts incurred by one party may alter its adversary's incentives to settle. We build a sequential game with one-sided asymmetric information where the informed party first decides to invest in case preparation, and the uninformed party then makes a settlement offer. Overinvestment, or bluff, always prevails in equilibrium: with positive probability, plaintiffs with weak cases take a chance on investing, and regret it in case of trial. Furthermore, due to the endogenous investment decision, the probability of trial may (locally) decrease with case strength. Overinvestment generates inefficient preparation costs, but may trigger more settlements, thereby reducing trial costs. (C) 2010 Elsevier Inc. All rights reserved.