Updating Priest and Klein
35 Pages Posted: 19 Jun 2015 Last revised: 14 Aug 2015
Date Written: August 13, 2015
In their 1984 article, “The Selection of Disputes for Litigation,” Priest and Klein famously hypothesized a “tendency toward 50 percent plaintiff victories” among litigated cases. Nevertheless, many scholars doubt the validity of their conclusions, because the model they relied upon does not meet modern standards of rigor. This article updates the Priest-Klein model by considering three modifications. First, we raise a novel critique of the Priest-Klein model — that it is non-Bayesian — and show that most of the results of Priest and Klein (1984) pertaining to limits nevertheless remain valid under a modified model in which parties use Bayes’ rule to refine their estimates of the plaintiff’s probability of prevailing. Second, we show that even when an incentive-compatible mechanism is imposed, many of the results remain valid for symmetric Nash equilibria. Finally, we show how the Priest-Klein model can be modified to analyze asymmetric information, show that most results are false under this modification, and compare the modified Priest-Klein model to standard asymmetric information models.
Note: *An earlier version of this paper was posted to SSRN as Sections 3, 4 and 5 of “The Priest-Klein Hypotheses: Proof, Generality, and Extensions.” That paper has now been divided in two. Sections 1, and 2 are now in “The Priest-Klein Hypotheses: Proofs and Generality.” Both papers also include improvements and refinements.
JEL Classification: C11, C7, C78, D8, D81, D82, K, K4, K41
Suggested Citation: Suggested Citation