Optimal Litigation Strategies with Signaling and Screening - Archive ouverte HAL
Article Dans Une Revue Games and Economic Behavior Année : 2010

Optimal Litigation Strategies with Signaling and Screening

Résumé

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.

Dates et versions

hal-00558169 , version 1 (21-01-2011)

Identifiants

Citer

Philippe Choné, Laurent Linnemer. Optimal Litigation Strategies with Signaling and Screening. Games and Economic Behavior, 2010, 70 (2), pp.271-288. ⟨10.1016/j.geb.2010.03.001⟩. ⟨hal-00558169⟩
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