Journal of Law, Economics, and Organization (2012) doi: 10.1093/jleo/ews015
49 Pages Posted: 4 Jun 2009 Last revised: 25 Jul 2012
Date Written: February 25, 2012
Preliminary injunctions (PIs) are important in litigation in many settings, including antitrust, copyright, patent, trademark, employment and labor relations, and contracts. The filing of a PI and the court's ruling generate information that can impact settlement. We find that some plaintiffs request a PI to signal bounds on their damages in order to elicit better settlement offers. As a result, the parties are more likely to come to an out-of-court agreement permitting the disputed activity, compared to when a PI is motivated solely by defensive reasons to avert immediate damages during trial. Although the grant of a PI reduces ex post incentives for potential litigants to settle, this is more than offset by an increase in settlement upon a denial. Thus, ex ante, learning leads to more settlement. Nevertheless, the anticipation of learning and increased chances of settlement do not affect the initial filing decision.
Keywords: preliminary injunction, learning, signaling, screening, litigation, settlement
JEL Classification: D8, J53, K21, K41, K42, L2
Suggested Citation: Suggested Citation
Jeitschko, Thomas D. and Kim, Byung-Cheol, Signaling, Learning, and Screening Prior to Trial: Informational Implications of Preliminary Injunctions (February 25, 2012). Journal of Law, Economics, and Organization (2012) doi: 10.1093/jleo/ews015 . Available at SSRN: https://ssrn.com/abstract=1414316 or http://dx.doi.org/10.2139/ssrn.1414316