FRIVOLOUS SUITS IN THE INFINITELY-REPEATED LITIGATION GAME WITH UNCERTAINTY

Abstract

We explain why 'frivolous suits (FS)' occur particularly under complete information. Existing analyses such as the 'traditional' and the 'early-defense-cost' models are not fully robust in that they either drop the plaintiff's withdrawal option or rely on a restrictive assumption that the defendant loses immediately unless he early defends himself at high cost. We pursue a more generalized explanation. We offer an infinite-period litigation model with uncertainty which reflects the reality more consistently. We then show that FS can occur as a subgame perfect equilibrium since the defendant over the pre-trial stage may settle with FS to save future time and/or trial costs. We further demonstrate that FS can occur even under the British rule of fee shifting.