Edited by Theodore Eisenberg and Giovanni B. Ramello
Chapter 15: The effect of stakes on settlement: An empirical lesson from Taiwan
Settlement and litigation has long been the topic of a rich body of literature. Scholars of law and economics have developed a variety of theoretical models to explore the factors affecting the mechanism of settlement and suit. Although these models compete with each other and sometimes lead to inconsistent predictions, they as a whole not only greatly enhance our understanding of parties’ disputing behaviors but also shed important light on how these behaviors are driven by economic considerations and influenced by applicable procedural rules. Earlier economic analyses of settlement and suit focus on parties’ divergent expectations of litigation outcomes and attribute the failure of settlement negotiation to, at least one party’s, excessive optimism (Landes 1971; Gould 1973; Posner 1973; Priest & Klein 1984). The basic model of this strand of analyses is straightforward.
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