Mutually beneficial agreements might fail if the parties fear contractual opportunism. Litigation is supposed to prevent this, but still leaves room for litigational opportunism: Even knowing that the opponent has fulfilled his obligations, a party might bring suit. We show that with positive...

The paper analyzes the effects of different litigation cost allocation rules, detection skill of judges (judicial errors), and the mode of enforcement of foreign judgments on the home bias in trade and sheds a new light on the so-called border-effect puzzle. In our model the border effect or...

The paper shows that Legal Cost Insurance (LCI) is a device to enhance potential litigants? bargaining position rather than to re-allocate risk. Being insured decreases the cost an insured party has to bear if settlement negotiations fail and the case goes to trial. This shifts the threat...

The paper compares the Nash bargaining solution of a simple settlement game (with perfect and complete information and imperfect decision making judges) to the equilibrium results of a trial game without settlement stage. The comparison allows for an evaluation of the efficiency of settlement...

In this paper, we analyze the impact of Bad Debt Loss Insurance on settlement outcomes. A huge success in a settlement or trial may turn into a disaster when the defendant goes bankrupt. "Rainmakers" face the following dilemma: the greater the success in court, the greater the defendant's...