Pretrial Bargaining with Asymmetric Information and Endogenous Expenditure at Trial
31 Pages Posted: 26 Aug 2010
Date Written: August 1, 2010
Abstract
We develop a model with asymmetric information, where the uninformed party makes the offer. When parties proceed to trial, their endogenous expenditures partially determine the outcome. The endogenous spending at trial can either strengthen or weaken the bargaining position of the uninformed party with the player types who settle. When the bargaining position is strengthened, some standard results on information transmission prior to trial may be overturned. The recipient of the offer with a weak case may make a costly voluntary disclosure. In addition, the party making the offer may refuse costless discovery. Both of these results contrast with the standard results in the literature derived from models in which spending at trial is treated as exogenous.
Keywords: Pretrial Bargaining, Asymmetric Information, Endogenous Expenditure at Trial, Discovery, Disclosure
JEL Classification: K4, D8
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
A New Theory Concerning the Credibility and Success of Threats to Sue
-
By Lucian A. Bebchuk and Alon Klement
-
Threats to Sue and Cost Divisibility Under Asymmetric Information
By Alon Klement
-
The Unexpected Value of Litigation
By Joseph Grundfest and Peter H. Huang
-
Civil Litigation with Mandatory Discovery and Voluntary Transmission of Private Information
By Amy Farmer and Paul Pecorino
-
A Solution to the Problem of Nuisance Suits: The Option to Have the Court Bar Settlement
By David Rosenberg and Steven Shavell
-
Pretrial Signaling with Negative Expected Value Suits
By Amy Farmer and Paul Pecorino