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...

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,...