Conditional Cost Shifting and the Incidence of Trial: Pretrial Bargaining in the Face of a Rule 68 Offer
Posted: 6 Nov 2000
Under Rule 68, a defendant may submit a pretrial offer of judgment to the plaintiff. If the plaintiff refuses this offer and later receives a smaller award at trial, the defendant's court costs subsequent to the offer are shifted to the plaintiff. We analyze Rule 68 in a game theoretic setting in which trials may result from an informational asymmetry: the defendant is the informed party, and bargaining may take place after the defendant submits an offer of judgment to the plaintiff. Rule 68 may encourage settlement through this offer of judgment by prompting partial revelation of privately held information.
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