Document Type
Article
Publication Date
9-2023
ISSN
0144-8188
Publisher
Elsevier
Language
en-US
Abstract
Why do some legal disputes fail to settle? From a bird’s eye view, the literature offers two categories of reasons. One consists of arguments based on informational disparities. The other consists of psychological arguments. This paper explores the psychological theory. It presents a model of litigation driven by risk preferences and examines the model’s implications for trials and settlements. The model suggests a foundation in Prospect Theory for the Mutual Optimism model of litigation. The model’s implications for plaintiff win rates, settlement patterns, and informational asymmetry with respect to the degree of risk aversion are examined.
Recommended Citation
Keith N. Hylton,
Mutual Optimism and Risk Preferences in Litigation
,
in
75
International Review of Law and Economics
(2023).
Available at:
https://scholarship.law.bu.edu/faculty_scholarship/3621
Comments
PDF is a preprint. Published version of article available at the source.