O'Connell Early Settlement Offers: Toward Realistic Numbers and Two‐Sided Offers

Bernard Black, David A. Hyman and Charles Silver

Journal of Empirical Legal Studies, 2010, vol. 7, issue 2, 379-401

Abstract: In a prior article in this journal, we estimated the effect of an “O'Connell” early settlement offer program on payouts in medical malpractice litigation. Using Texas data and a base set of assumptions, we predicted that early offers would result in a 16 percent (20 percent) decline in payouts in currently tried (settled) cases. The overall decline came almost entirely from a sharp drop in payouts in cases with small economic damages. We compared our results with the estimate by Hersch, O'Connell, and Viscusi (2007) (HOV) of a 70 percent reduction in payouts, reconciled the two estimates, and explained why HOV's estimate reflected the compound effects of a series of unreasonable assumptions. In a reply in this journal, Hersch, O'Connell, and Viscusi (2010) (HOV‐2) complain that we misunderstand both the early offer proposal and their analysis. Remarkably, they do not dispute our estimates, given our assumptions. In this rebuttal, we defend our assumptions and provide an alternate analysis of settled cases based on insurer allocations, which also produces an estimated 20 percent payout decline. We also develop further our proposal for two‐sided early offers. This proposal would reduce the predicted payout decline by about 2 percent in both tried and settled cases. We explain in greater detail the problems with HOV's analysis. If we correct an error they made in understanding the Texas data set, and leave their other assumptions unchanged, their payout decline estimate drops to 30 percent, not far from ours.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/j.1740-1461.2010.01182.x

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:wly:empleg:v:7:y:2010:i:2:p:379-401

Access Statistics for this article

More articles in Journal of Empirical Legal Studies from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().