Advantage Defendant: Why Sinking Litigation Costs Makes Negative-Expected-Value Defenses but Not Negative-Expected-Value Suits Credible

Warren F. Schwartz and Abraham L. Wickelgren

The Journal of Legal Studies, 2009, vol. 38, issue 1, 235-253

Abstract: We revisit Lucian Bebchuk's 1996 claim that plaintiffs can use the sequential nature of litigation to extract a positive settlement from a negative-expected-value suit. We make three claims. First, this result is heavily dependent on the specific bargaining game he uses. Second, in an alternating-offer bargaining game, the outside-option principle demonstrates that this cost-sinking strategy will not allow a negative-expected-value plaintiff to extract a positive settlement offer. Third, this cost-sinking strategy, however, can be effective for a defendant using a negative-expected-value defense. (c) 2009 by The University of Chicago. All rights reserved.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://dx.doi.org/10.1086/587144 link to full text (text/html)
Access to the online full text or PDF requires a subscription.

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:ucp:jlstud:v:38:y:2009:i:1:p:235-253

Access Statistics for this article

More articles in The Journal of Legal Studies from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().