This paper explains why the methodology proposed by Waterman and Peterson (R-2717-ICJ) to study the process of legal settlements is vulnerable to the same criticism that Lucas has made so forcefully about econometric policy evaluations. It goes on to propose an alternative methodology which does not suffer from this weakness. The alternative involves viewing the settlement process as a game. The paper assumes familiarity with neither Lucas' critique nor the theory of games. A companion paper (P-6809) illustrates how to implement the methodology proposed here. It considers strategic interactions in the settlement of personal injury claims in which information about the severity of the injury is known (and known to be known) only to the injured party.
This report is part of the RAND Corporation Paper series. The paper was a product of the RAND Corporation from 1948 to 2003 that captured speeches, memorials, and derivative research, usually prepared on authors' own time and meant to be the scholarly or scientific contribution of individual authors to their professional fields. Papers were less formal than reports and did not require rigorous peer review.
This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit www.rand.org/pubs/permissions.
The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.