Does the Priest and Klein Model Travel? Testing Litigation Selection Hypotheses with Foreign Court Data

70 Pages Posted: 22 Feb 2018 Last revised: 23 Feb 2018

Yun-chien Chang

Academia Sinica - Institutum Iurisprudentiae (IIAS)

William H. J. Hubbard

University of Chicago Law School

Date Written: January 25, 2018

Abstract

Law and economics theorists have long advanced theories of litigation and settlement, including the canonical Priest and Klein (1984) model that predicts that, as settlement rates rise, plaintiff win rates approach 50%. Empiricists have tested this and other predictions from the theoretical literature, finding qualified support for the Priest and Klein model. So far, though, this literature has relied primarily on data from the U.S. Yet, because this model rests on simple assumptions about human behavior in the context of a legal dispute, not on any distinctive features of American litigation, its basic insights should apply everywhere. In this paper, we put the universality of the Priest and Klein model to the test, using a unique administrative data set from Taiwan, comprising about a half-million observations. We find strongly suggestive evidence in favor of the Priest and Klein model. We consider variants of the model incorporating risk aversion and compare results testing potential implications of models of settlement under asymmetric information.

Keywords: Priest-Klein model, 50 percent hypothesis, divergent expectations, asymmetric information, risk aversion, trial rate, settlement rate, plaintiff win rate, attorney representation

Suggested Citation

Chang, Yun-chien and Hubbard, William H. J., Does the Priest and Klein Model Travel? Testing Litigation Selection Hypotheses with Foreign Court Data (January 25, 2018). University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 838. Available at SSRN: https://ssrn.com/abstract=3127728 or http://dx.doi.org/10.2139/ssrn.3127728

Yun-chien Chang (Contact Author)

Academia Sinica - Institutum Iurisprudentiae (IIAS) ( email )

128 Academia Sinica Rd., Sec. 2
Nankang
Taipei City, 11529
Taiwan

William H. J. Hubbard

University of Chicago Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States
773-834-8999 (Phone)

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