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An Asymmetric Information Model of Litigation

Posted: 2 Oct 2001  

Keith N. Hylton

Boston University - School of Law

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Abstract

This paper presents a cradle-to-grave model of tort liability, incorporating the decision to comply with the due-care standard, the decision to file suit, and the decision to settle. I use the model primarily to examine settlement rates, plaintiff win rates, and compliance with the due-care standard. The key results of the model are as follows: (1) litigation to judgment occurs only when some but not all actors comply with the due-care standard, and (2) if defendants have the information advantage at trial, plaintiff win rates generally will be less than fifty percent. I apply the model and its simulation results to several empirical issues in the litigation literature. The model simulation indicates that the British rule for allocating legal costs is superior to alternatives in terms of social welfare. In addition, the model is capable of explaining several empirical features of litigation and puzzles in the literature on trial outcomes.

JEL Classification: K41

Suggested Citation

Hylton, Keith N., An Asymmetric Information Model of Litigation. International Review of Law and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=285858

Keith N. Hylton (Contact Author)

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States
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