Costly pretrial agreements

Luca Anderlini, Leonardo Felli, Giovanni Immordino

Research output: Contribution to journalArticlepeer-review

Abstract

Settling a legal dispute involves some costs that the parties have to in curex-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.
Original languageEnglish
Pages (from-to)159–188
JournalJournal of Legal Studies
Volume48
Issue number1
DOIs
Publication statusPublished - 31 Jan 2019

Keywords

  • pretrial agreements
  • costly negotiations
  • court litigation

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