Pretrial Signaling with Negative Expected Value Suits

U of Alabama, Economics, Finance and Legal Studies Working Paper No. 02-07-01

24 Pages Posted: 23 Jul 2002

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

Date Written: July 2002

Abstract

We extend the signaling model of Reinganum and Wilde (1986) by allowing for the possibility of negative expected value (NEV) suits. If filing costs are positive, then there exists a separating equilibrium such that plaintiffs with NEV suits choose not to file. By making the filing decision endogenous, we are able to derive new insights on the effects of fee shifting and contingency fees in the signaling model.

Keywords: Signaling, Pretrial Settlement, Negative Expected Value Suits

JEL Classification: K4, D8

Suggested Citation

Farmer, Amy and Pecorino, Paul, Pretrial Signaling with Negative Expected Value Suits (July 2002). U of Alabama, Economics, Finance and Legal Studies Working Paper No. 02-07-01, Available at SSRN: https://ssrn.com/abstract=318690 or http://dx.doi.org/10.2139/ssrn.318690

Amy Farmer

University of Arkansas - Department of Economics ( email )

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

Paul Pecorino (Contact Author)

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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