{"title":"Mutual optimism and risk preferences in litigation","authors":"Keith N. Hylton","doi":"10.1016/j.irle.2023.106157","DOIUrl":null,"url":null,"abstract":"<div><p>Why do some legal disputes fail to settle? From a bird’s eye view, the literature offers two categories of reasons. One consists of arguments based on informational disparities. The other consists of psychological arguments. This paper explores the psychological theory. It presents a model of litigation driven by risk preferences and examines the model’s implications for trials and settlements. The model suggests a foundation in Prospect Theory for the Mutual Optimism model of litigation. The model’s implications for plaintiff win rates, settlement patterns, and informational asymmetry with respect to the degree of risk aversion are examined.</p></div>","PeriodicalId":47202,"journal":{"name":"International Review of Law and Economics","volume":"75 ","pages":"Article 106157"},"PeriodicalIF":0.9000,"publicationDate":"2023-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Review of Law and Economics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0144818823000352","RegionNum":3,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
Why do some legal disputes fail to settle? From a bird’s eye view, the literature offers two categories of reasons. One consists of arguments based on informational disparities. The other consists of psychological arguments. This paper explores the psychological theory. It presents a model of litigation driven by risk preferences and examines the model’s implications for trials and settlements. The model suggests a foundation in Prospect Theory for the Mutual Optimism model of litigation. The model’s implications for plaintiff win rates, settlement patterns, and informational asymmetry with respect to the degree of risk aversion are examined.
期刊介绍：
The International Review of Law and Economics provides a forum for interdisciplinary research at the interface of law and economics. IRLE is international in scope and audience and particularly welcomes both theoretical and empirical papers on comparative law and economics, globalization and legal harmonization, and the endogenous emergence of legal institutions, in addition to more traditional legal topics.
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