This chapter presents a strategic model of incentives for care and litigation under asymmetric information and self-serving bias, and studies the effects of damage caps. Our main findings are as follows. First, our results suggest that the defendant's bias decreases his expenditures on accident...

The efficiency of common law rules is central to achieving efficient resource allocation in a market economy. While many theories suggest reasons why judge-made law should tend toward efficient rules, the question whether the common law actually does converge in commercial areas has remained...

We provide a simple framework in which the level of adversarial bias is endogenously determined in a litigation process. Using this model, we study the effect of using a court-appointed expert on the level of adversarial bias and the average error rates, and find an interesting trade-off:...

Litigation finance refers to investments in litigation by a third person not originally a party to the suit. Whether the country should embrace this new practice has sparked debate among the bar, on the Hill, in the press, and between scholars. We disagree with the premise of this debate;...

Basic economic analysis of litigation funding shows that risk neutral plaintiffs without budget constraints will not accept funding unless they are pessimistic relative to the funder. Risk aversion makes a plaintiff who shares probabilistic beliefs with the funder act observationally equivalent...

This chapter examines the basic model of the law and economics of litigation. Because the Rules of Civil Procedure and the Economics of the Litigation/Settlement decision are covered in separate chapters of this volume, this chapter will focus on private civil litigation, in particular the...

The goal of this paper is to study how litigation and settlement behavior is affected by subjects motivated by spiteful preferences -- a potentially common driver for litigation behavior. We focus on litigation and settlement behavior both under the American and the English fee-shifting rule. To...

A settlement is an agreement between parties to a dispute. In everyday parlance and in academic scholarship, settlement is juxtaposed to trial or some other method of dispute resolution in which a third-party factfinder ultimately picks a winner and announces a score. The “trial versus...

The burden of proof is a central feature of adjudication, and analogues exist in many other settings. It constitutes an important but largely unappreciated policy instrument that interacts with the level of enforcement effort and magnitude of sanctions in controlling harmful activity. Models are...