An Empirical Analysis of the Signaling and Screening Models of Litigation

46 Pages Posted: 19 Jan 2012 Last revised: 15 Jun 2016

See all articles by Paul Pecorino

Paul Pecorino

University of Alabama - Department of Economics, Finance and Legal Studies

Mark van Boening

University of Mississippi - Department of Economics

Date Written: June 2016

Abstract

We present an experimental analysis of the signaling and screening models of litigation. In both models, bargaining failure is driven by asymmetric information. The difference between the models lies in the bargaining structure: In the signaling game, the informed party makes the final offer, while in the screening game the uninformed party makes the final offer. We conduct experiments for both models under a common set of parameter values, allowing only the identity of the party making the final offer to change. We find anomalous behavior to be more common in the signaling game, but the frequency of this behavior diminishes in the later rounds of the experiment. Having the right to make the offer raises a players expected payoffs, but by much less than is predicted by theory. Dispute rates across the two games are approximately equal.

Keywords: Signaling Model, Screening Model, Civil Litigation, Experiment, Asymmetric Information

JEL Classification: K4, D8

Suggested Citation

Pecorino, Paul and van Boening, Mark, An Empirical Analysis of the Signaling and Screening Models of Litigation (June 2016). Available at SSRN: https://ssrn.com/abstract=1988244 or http://dx.doi.org/10.2139/ssrn.1988244

Paul Pecorino (Contact Author)

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States
205-348-0379 (Phone)
205-348-0590 (Fax)

Mark Van Boening

University of Mississippi - Department of Economics ( email )

371 Holman Hall
University, MS 38677
United States

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