An asymmetric-information model of litigation

Authors

• Keith N. Hylton, Boston University School of LawFollow

Author granted license

Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International

Document Type

Article

Publication Date

8-2002

ISSN

0144-8188

Publisher

Elsevier

Language

en-US

Abstract

This paper presents a cradle-to-grave model of tort liability, incorporating the decision to comply with the due-care standard, the decision to file suit, and the decision to settle. I use the model primarily to examine settlement rates, plaintiff win rates, and compliance with the due-care standard. The key results of the model are as follows: (1) litigation to judgment occurs only when some but not all actors comply with the due-care standard, and (2) if defendants have the information advantage at trial, plaintiff win rates generally will be less than 50 percent. I apply the model and its simulation results to several empirical issues in the litigation literature. The model simulation indicates that the British rule for allocating legal costs is superior to alternatives in terms of social welfare. In addition, the model is capable of explaining several empirical features of litigation and puzzles in the literature on trial outcomes.

Recommended Citation

Keith N. Hylton, An asymmetric-information model of litigation , 22 International Review of Law and Economics 153 (2002).
Available at: https://doi.org/10.1016/S0144-8188(02)00085-6