In a model of pretrial bargaining under asymmetric information, we analyze the defendant’s threat to proceed to trial in the face of a rejected offer. The incidence of trial is lower when the defendant’s constraint is binding compared with the unconstrained case. The signs of some of the...

We develop a model of pretrial bargaining under asymmetric information where both the plaintiff and the defendant’s cost of proceeding to trial is an increasing function of the judgment at trial. This contrasts with the standard assumption that costs at trial are a constant. As a result of...

We develop a signaling model of final offer arbitration (FOA) in which the informed party makes the final settlement demand to the uninformed party. In FOA, each party submits a proposal to an arbitrator and if no agreement is reached, the arbitrator must select one of the two submitted...

We consider a model of litigation in which some defendants have insufficient assets to pay a judgment at trial. Because the defendant's assets are not observable, this serves as a source of asymmetric information which leads to trials in the equilibrium of the model. Unlike many other types of...

Much of the law and economics literature, including Bebchuk (1984) and Reinganum and Wilde (1986), explains settlement failure in bargaining as a consequence of asymmetric information. An alternative, non-strategic explanation found in Shavell (1982) suggests that settlement failure stems from...

Two standard results in the litigation literature are that an informed party will not make a costly voluntary disclosure in a screening game and that the uninformed party will not engage in costly discovery in the signaling game. Both of these results rely on the assumption that the party making...

We develop screening models of final offer arbitration (FOA) in which the uninformed party makes a demand to the informed party. We consider models in which settlement occurs before and after the submission of binding offers, and in each we analyze costly discovery. Our results are compared to...

Recently a great deal of controversy has been generated from the salaries earned by head football coaches in the NCAA. On one level this seems odd since many figures in the world of sports and entertainment earn exceptionally high salaries. However, one important difference in the case of NCAA...

Under final offer arbitration (FOA), each party to the dispute submits a proposal to the arbitrator who must choose one of the two submitted proposals in the event of a dispute. A long line of research on FOA has assumed that the submitted proposals to the arbitrator are the final bargaining...

We introduce self-serving bias into the Bebchuk (1984) model in which trials result from asymmetric information and characterize the equilibrium. An increase in the self-serving bias of a defendant who receives an offer can, under some circumstances, reduce the incidence of trial. More...