Demand for Artificial Intelligence in Settlement Negotiations

Joshua Gans

No 32685, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: When AI prediction substantially resolves trial uncertainty, a party purchasing AI prediction will disclose it if it is in their favour and not otherwise, signalling the outcome to the other party. Thus, the trial outcome becomes common knowledge. However, this implies that the parties will settle rather than purchase the AI prediction. When parties have differing prior beliefs regarding trial outcomes, these differences are only resolved if the AI prediction is purchased and utilised. In this case, AI will be purchased in equilibrium. Different trial cost allocation rules awarding all costs to the losing party (the English Rule) or having each party bear their own costs (the American Rule) can impact the demand for AI for settlement negotiations, but how this occurs interacts with the expectations regarding whether a settlement will occur or not in AI's absence.

JEL-codes: K41 O31 (search for similar items in EconPapers)
Date: 2024-07
New Economics Papers: this item is included in nep-ain, nep-gth and nep-mic
Note: LE PR
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Citations: View citations in EconPapers (1)

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