Litigation with a Variable Cost of Trial

30 Pages Posted: 25 Sep 2012

See all articles by Amy Farmer

Amy Farmer

University of Arkansas - Department of Economics

Paul Pecorino

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

Date Written: September 2012

Abstract

We develop a model of pretrial bargaining under asymmetric information where both the plaintiff and the defendant’s cost of proceeding to trial is an increasing function of the judgment at trial. This contrasts with the standard assumption that costs at trial are a constant. As a result of this assumption, fee shifting can affect the incidence of trial in a model in which it would otherwise have no effect. Fee shifting will increase the incidence of trial if the plaintiff expects to shift costs to the defendant on net, and will lower the incidence of trial if the defendant expects to shift costs to the plaintiff. The model also implies that a reallocation of the variable costs of trial from the defendant to the plaintiff will lower the incidence of trial.

Keywords: Pretrial Bargaining, Asymmetric Information, Variable Cost of Trial, Fee Shifting

JEL Classification: C7, D82, K41

Suggested Citation

Farmer, Amy and Pecorino, Paul, Litigation with a Variable Cost of Trial (September 2012). Available at SSRN: https://ssrn.com/abstract=2151942 or http://dx.doi.org/10.2139/ssrn.2151942

Amy Farmer

University of Arkansas - Department of Economics ( email )

Fayetteville, AR 72701
United States
501-575-6093 (Phone)
501-575-3241 (Fax)

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)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
63
Abstract Views
592
rank
378,793
PlumX Metrics