Research Handbooks in Law and Economics series
Edited by Jennifer H. Arlen
Chapter 14: Bounded rationality in the settlement process: Empirical evidence on the causes of settlement failure in litigation
Trial outcomes are by definition inefficient: ex post, both parties would have preferred to settle voluntarily for the trial outcome rather than pay the additional costs incurred by litigating to a trial verdict. Research on the percentage of cases that settle without a trial outcome (the settlement rate) finds that while the majority of cases settle, a non-trivial number are resolved by trial (Heise 2013; Studdert et al. 2006; Eisenberg and Lanvers 2009; Galanter and Cahill 1994; Hadfield 2004; Clermont and Schwab 2009) indicating substantial inefficiencies in the current legal system. Inefficiencies and conflict attract researchers, and there are enormous literatures in the social and behavioral sciences that investigate why disputants cannot resolve their differences on their own.
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