Informational Externalities in Settlement Bargaining: Confidentiality and Correlated Culpability

Andrew Daughety and Jennifer Reinganum ()

RAND Journal of Economics, 2002, vol. 33, issue 4, 587-604

Abstract: We explore informational externalities that arise when multiple plaintiffs are harmed by the behavior or product of a single defendant. An early plaintiff is likely to raise the awareness of a later plaintiff, and the later plaintiff will be able to learn something about the defendant's culpability by observing the disposition of the early suit: the presence of an early plaintiff provides a benefit to a later plaintiff. The presence of the later plaintiff also confers a potential benefit on the early plaintiff: the early plaintiff has the opportunity to charge the defendant for controlling the flow of information (e.g., through confidential settlement).

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:rje:randje:v:33:y:2002:i:winter:p:587-604

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