The Promise of Bargaining Protocols

Litigants settle in the shadow of the law, but they behave in the shadow of the settlement outcome. Disparities in bargaining power drive a wedge between the shadow of the settlement and the shadow of the law. Broad literature has recognized various problems that stem from this discrepancy, from suboptimal deterrence to distributive concerns. We offer a new perspective to address these concerns—regulating the settlement process, through a judge-induced bargaining protocol. We develop this argument through a bargaining protocol that assigns a take-it-or-leave-it offer to one of the parties and discuss the policy goals that such protocol could advance.