Asymmetric Stakes in Antitrust Litigation

Private antitrust litigation often involves a dominant firm being accused of exclusionary conduct by a smaller rival. In such cases, the defendant generally has a much larger financial stake in the outcome. We explore the implications of this asymmetry in a model of litigation with endogenous effort. Asymmetric stakes lead antitrust defendants to invest systematically more resources into litigation, causing a downward bias in the plaintiff's success probability---a distortion that carries over to ex ante settlements. Enhanced damages cannot prevent this systematic bias. We show that, in most private litigation contexts, asymmetric stakes do not create any distortion, because the prospect of ex post (post-judgment) settlement makes the litigants behave as if the stakes are symmetric. But this does not occur in antitrust, because it proscribes certain ex post settlements. We consider how courts might mitigate the distortion by altering the plaintiff's evidentiary burden