Comparative Analysis of Litigation Systems: An Auction-Theoretic Approach

A simple auction-theoretic framework is used to examine symmetric litigation environments where the legal ownership of a disputed asset is unknown to the court. The court observes only the quality of the case presented by each party, and awards the asset to the party presenting the best case. Rational litigants influence the quality of their cases by hiring skilful attorneys. This framework permits us to compare the equilibrium legal expenditures that arise under a continuum of legal systems. The British rule, Continental rule, American rule, and some recently proposed legal reforms are special cases of our model. Copyright 2005 Royal Economic Society.