This paper reports results from a bargaining experiment testing the effect on settlement rates of a damage cap set much higher than the value of the underlying claim. We presented 462 student subjects with materials outlining a personal injury lawsuit and permitted randomly assigned subject...

Since 1970, at least 30 states have enacted legislation capping the damages plaintiffs can recover in a lawsuit. Guided by previous research on suit and settlement, we outline a simple framework for examining the effects of a cap on litigant judgments and the pretrial settlement rate. We then...