FRIVOLOUS SUITS IN THE INFINITELY-REPEATED LITIGATION GAME WITH UNCERTAINTY

Iljoong Kim and Jaehong Kim

Hitotsubashi Journal of Economics, 2015, vol. 56, issue 1, 21-33

Abstract: We explain why 'frivolous suits (FS)' occur particularly under complete information. Existing analyses such as the 'traditional' and the 'early-defense-cost' models are not fully robust in that they either drop the plaintiff's withdrawal option or rely on a restrictive assumption that the defendant loses immediately unless he early defends himself at high cost. We pursue a more generalized explanation. We offer an infinite-period litigation model with uncertainty which reflects the reality more consistently. We then show that FS can occur as a subgame perfect equilibrium since the defendant over the pre-trial stage may settle with FS to save future time and/or trial costs. We further demonstrate that FS can occur even under the British rule of fee shifting.

Keywords: frivolous suit; negative expected value suit; uncertainty; time cost; settlement; American rule; British rule (search for similar items in EconPapers)
JEL-codes: H4 K4 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitjec:v:56:y:2015:i:1:p:21-33

DOI: 10.15057/27196

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