Litigation with Default Judgments

24 Pages Posted: 23 Feb 2013

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: February 21, 2013

Abstract

In a model of pretrial bargaining under asymmetric information, we analyze the defendant’s threat to proceed to trial in the face of a rejected offer. The incidence of trial is lower when the defendant’s constraint is binding compared with the unconstrained case. The signs of some of the comparative statics of the model are a function of whether or not the defendant’s credibility constraint is binding. In particular, fee shifting has no effect on the incidence of trial when the credibility constraint is not binding, but has an ambiguous effect when the constraint is binding. In this latter case, the use of fee shifting will lower the incidence of trial if and only if the plaintiff expects to shifts fees on net to the defendant.

Keywords: Pretrial Bargaining, asymmetric information, default judgments

JEL Classification: K41, C7

Suggested Citation

Farmer, Amy and Pecorino, Paul, Litigation with Default Judgments (February 21, 2013). Available at SSRN: https://ssrn.com/abstract=2222222 or http://dx.doi.org/10.2139/ssrn.2222222

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)

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