A Potentially Known Confidential Settlement

Frances Xu Lee

The Journal of Law, Economics, and Organization, 2023, vol. 39, issue 2, 493-520

Abstract: This article studies the incentive to settle confidentially, openly, or to go to trial given that the existence of a confidential settlement might become publicly known. Depending on whether the defendant (D) or the plaintiff cares more about the Public’s inference from the litigation outcome, a confidential settlement may signal a more-culpable or less-culpable D. The informational disadvantage of confidentiality is weighed against the benefit of privacy, as well as the litigants’ relative desire for more visibility or less visibility. (JEL K41, K13).

Date: 2023
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