Conditional Cost Shifting and the Incidence of Trial: Pretrial Bargaining in the Face of a Rule 68 Offer

Posted: 6 Nov 2000

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

Abstract

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.

Suggested Citation

Farmer, Amy and Pecorino, Paul, Conditional Cost Shifting and the Incidence of Trial: Pretrial Bargaining in the Face of a Rule 68 Offer. American Law and Economics Review, Vol. 2, No. 2, pp. 318-341, 2000, Available at SSRN: https://ssrn.com/abstract=244341

Amy Farmer (Contact Author)

University of Arkansas - Department of Economics ( email )

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

Paul Pecorino

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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