Costly Pretrial Agreements

Leonardo Felli, Luca Anderlini and Giovanni Immordino

No 13074, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Pretrial agreements; Costly negotiations; Court litigation (search for similar items in EconPapers)
JEL-codes: C79 D23 D86 K12 K13 (search for similar items in EconPapers)
Date: 2018-07
New Economics Papers: this item is included in nep-gth, nep-law and nep-mic
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Related works:
Journal Article: Costly Pretrial Agreements (2019)
Working Paper: Costly pretrial agreements (2019)
Working Paper: Costly Pre-Trial Agreements (2018)
Working Paper: Costly Pretrial Agreements (2016)
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