Why Wait to Settle? An Experimental Test of the Asymmetric Information Hypothesis

29 Pages Posted: 3 Feb 2014 Last revised: 6 Mar 2018

See all articles by Sean Sullivan

Sean Sullivan

University of Iowa College of Law

Date Written: August 1, 2016

Abstract

The U.S. legal system encourages civil litigants to quickly settle their disputes, but the suggestion is rarely entertained. Instead, lengthy and expensive delays often precede private settlements. The exact motivations of this puzzling delay are uncertain. This paper describes an economic experiment designed to test one possible hypothesis: that asymmetric information might be a contributing cause of observed settlement delay. Experimental results provide strong evidence that asymmetric information can delay settlements, increasing average delay by as much as 100% in the lab. This causal relationship is robust across different bargaining environments. But results do not obviously confirm all aspects of the game-theoretic explanation for this relationship. And they suggest that asymmetric information may be at most one of several contributing causes of settlement delay.

Suggested Citation

Sullivan, Sean, Why Wait to Settle? An Experimental Test of the Asymmetric Information Hypothesis (August 1, 2016). Journal of Law and Economics, Vol. 59, 2016. Available at SSRN: https://ssrn.com/abstract=2389642 or http://dx.doi.org/10.2139/ssrn.2389642

Sean Sullivan (Contact Author)

University of Iowa College of Law ( email )

Melrose and Byington
Iowa City, IA 52242
United States

HOME PAGE: http://sean-p-sullivan.com

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