Care Levels, Settlement Outcomes, and the Sophistication of Present-Biased Plaintiffs

Tim Friehe and Christoph Rössler

Revue économique, 2020, vol. 71, issue 3, 459-478

Abstract: This paper analyzes a framework in which a (potentially) present-biased injurer faces (potentially) present-biased plaintiffs. We focus on the injurer?s care incentives and victims? filing and settlement behavior. Present-biased victims are less likely to file and more moderate in their settlement demand when compared to those without bias. This fact lowers the injurer?s precautions. Plaintiffs may be naive or sophisticated about their present bias. We show that plaintiffs? sophistication about their present bias aggravates the distortion of the equilibrium accident probability. JEL Codes: D91, H23, K41.

Keywords: litigation; present bias; care (search for similar items in EconPapers)
JEL-codes: D91 H23 K41 (search for similar items in EconPapers)
Date: 2020
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