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Asymmetric information, self-serving bias and the pretrial negotiation impasse

Eric Langlais

No 2008-30, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: There is evidence that asymmetric information does exist between litigants: not in a way supporting Bebchuk (1984)’s assumption that defendants’ degree of fault is private information, but more likely as a result of parties’ predictive capacity about the outcome at trial (Osborne, 1999). In this paper, we investigate the incidence of one component of this asymmetric predictive power, which has been examplified in experimental economics. We assume that litigants assess their priors on the plaintiff’s prevailing rate at trial in a way consistent with the self-serving bias, which is the source of the asymmetric information. We compare the predictions of this model regarding the influence of individual priors with those in the literature. Finally, we analyse the influence of another reason for probability distorsion, i.e. risk aversion in the sense of Yaari (1987).

Keywords: litigation; pretrial bargaining; self-serving bias; risk aversion (search for similar items in EconPapers)
JEL-codes: D81 K42 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2008
New Economics Papers: this item is included in nep-cta, nep-law and nep-upt
References: View references in EconPapers View complete reference list from CitEc
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2008-30

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