We construct game-theoretic foundations for bargaining in the shadow of a trial. Plaintiff and defendant both have noisy signals of a common-value trial judgment and make simultaneous offers to settle. If the offers cross, they settle on the average offer; otherwise, both litigants incur an...

Recommended readings (Machine generated): Henry Hansmann (1988), 'Ownership of the Firm', Journal of Law, Economics, and Organization, IV (2), Fall, 267-304 -- Paul H. Rubin (1978), 'The Theory of the Firm and the Structure of the Franchise Contract', Journal of Law and Economics, 21 (1), April,...

This paper analyzes contests where contestants have private information about their abilities, and these abilities may be correlated. It differs from previous work chiefly in that it allows for such imperfect correlation, and that it restricts attention to a discrete output space. The latter...