Table of Contents

Research Handbook on the Economics of Torts

Research Handbook on the Economics of Torts

Research Handbooks in Law and Economics series

Edited by Jennifer H. Arlen

This pioneering Handbook contains specially-commissioned chapters on tort law from leading experts in the field. This volume evaluates issues of vital importance to those seeking to understand and reform the tort law and the litigation process, taking a multi-disciplinary approach, including theoretical economic analysis, empirical analysis, socio-economic analysis, and behavioral analysis. Topics discussed include products liability, medical malpractice, causation, proximate cause, joint and several liability, class actions, mass torts, vicarious liability, settlement, damage rules, juries, tort reform, and potential alternatives to the tort system. Scholars, students, legal practitioners, regulators, and judges with an interest in tort law, litigation, damages, and reform will find this seminal Handbook an invaluable addition to their libraries.

Chapter 14: Bounded rationality in the settlement process: Empirical evidence on the causes of settlement failure in litigation

Linda Babcock and Joshua Furgeson

Subjects: economics and finance, law and economics, law - academic, law and economics, law of obligations


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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