This article translates and extends Becker (1968) from public law enforcement to private litigation by examining optimal legal system design in a model with private suits, signals of case strength, court error, and two types of primary behavior: harmful acts that may be deterred and benign acts...

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...

Two risk-averse litigants with different subjective beliefs negotiate in the shadow of a pending trial. Through contingent contracts, the litigants can mitigate risk and/or speculate on the trial outcome. The opportunity for contingent contracting decreases the settlement rate and increases the...

We formally analyze the effects of legal presumptions in patent litigation. We set up a novel contest model to study litigation outcomes, judgement errors, and resource dissipation under three alternative presumption criteria: a presumption that the patent is valid; a presumption that the patent...