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Article
Credible discovery, settlement, and negative expected value suits
Rand Journal of Economics (2009)
  • Abraham L. Wickelgren
  • Warren F Schwartz, Georgetown University
Abstract
We introduce discovery into a model of settlement and negative expected value (NEV) suits under asymmetric information. The option to conduct discovery has several important effects. First, because discovery is cheaper than litigation, it reduces the defendant's incentive to settle under asymmetric information. Second, discovery must be credible. Because discovery is more valuable the greater the uncertainty it resolves, this introduces a credibility constraint on pre-discovery settlement offers. This can further reduce the probability and size of a defendant's pre-discovery settlement offer. Lastly, discovery reduces the ability of NEV plaintiffs to use asymmetric information to extract significant settlements from defendants.
Disciplines
Publication Date
Winter 2009
Citation Information
Abraham L. Wickelgren and Warren F Schwartz. "Credible discovery, settlement, and negative expected value suits" Rand Journal of Economics Vol. 40 Iss. 4 (2009)
Available at: http://works.bepress.com/abraham_wickelgren/22/