The existence of lawsuits providing plaintiffs a negative expected value (NEV) at trial has important theoretical implications for signaling models of litigation. The signaling equilibrium possible absent NEV suits breaks down with NEV suits because plaintiffs do not have a credible threat to...

We analyze contingency fees in the Reinganum and Wilde (1986) signaling model of litigation. The effect of contingency fees on settlement depends upon the details of the contingency fee contract and the nature of the informational asymmetry assumed in the model. Introducing bifurcated fee...

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...