Litigation and settlement under loss aversion

Cédric Argenton () and Xiaoyu Wang
Additional contact information
Cédric Argenton: Tilburg University
Xiaoyu Wang: Shandong University

European Journal of Law and Economics, 2023, vol. 56, issue 2, No 5, 369-402

Abstract: Abstract In this paper, we investigate how loss aversion affects people’s behavior in private litigation. We find that a loss-averse plaintiff demands a higher settlement for intermediate claims to maintain her threat to proceed to trial following rejection compared to a loss-neutral plaintiff. For larger claims, a loss-averse plaintiff demands a lower offer to increase the settlement probability as loss pains her extra in trial. We also investigate how various policies affect loss-averse litigants’ settlement decisions. Only a reduction in the asymmetry of information about trial odds uniformly leads to higher settlement rates.

Keywords: Settlement; Loss aversion; Asymmetric information (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10657-023-09777-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:ejlwec:v:56:y:2023:i:2:d:10.1007_s10657-023-09777-6

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10657

DOI: 10.1007/s10657-023-09777-6

Access Statistics for this article

European Journal of Law and Economics is currently edited by Jürgen Georg Backhaus, Giovanni B. Ramello and Alain Marciano

More articles in European Journal of Law and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().