Georgetown University)Costly Pretrial Agreements • July 22nd, 2018
Abstract. Settling a legal dispute involves some costs that the parties have to incur ex-ante, for the pretrial negotiation and possible agreement to become feasible. Even in a full information world, if the distribution of these costs is sufficiently mismatched with the distribution of the parties’ bargaining powers, a pretrial agreement may never be reached even though actual Court litigation is overall wasteful.
Costly Pretrial AgreementsCostly Pretrial Agreements • July 14th, 2016
Legal disputes are either settled or end up in Court. Settling a dispute involves some costs (time and money invested in preparations) that the parties have to incur ex-ante, in order for the pretrial negotiation and possible agreement to become feasible. Even in a full information world, if the distribution of these costs is sufficiently mismatched with the distribution of the parties' bargaining powers, a pretrial agreement may never be reached even though actual Court litigation is overall wasteful. As parameters vary, the equilibrium of our full information model with costly pretrial agreements sheds light on two key features of how disputes are initiated and subsequently handled. First, in some cases a Plaintiff may initiate a law suit even though the parties fully anticipate that it will be settled out of Court. Second, the “likelihood” that a given law suit ends up in Court is unaffected by the way trial costs are distributed among the litigants (e.g. English Rule or American Ru
