We conduct an experimental analysis of signaling games using three models of arbitration. In the signaling model, the informed party in the dispute makes a settlement demand to the uninformed party. In conventional arbitration (CA), the arbitrator is free to impose her preferred settlement. In...

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...