Litigation of Questioned Settlement Claims

A Bayesian-Nash-Equilibrium Approach

Stephen W. Salant, Gregory J. Rest

Expert InsightsPublished 1982

Before reforms in legal procedures are implemented, their consequences should be thoroughly explored. In this paper, the authors present a methodology for evaluating the consequences of changes in legal procedures. They consider legal settlements of personal injury disputes. Even though there are assumed to exist out-of-court settlements which both plaintiff and defendant would prefer to a court fight if they had complete information, such settlements may fail to occur because the defendant lacks complete information about the extent of the plaintiff's injuries and sometimes challenges demands he suspects to be inflated. The authors treat adversarial behavior in the settlement process as the strategic interaction of players in a game of incomplete information. To illustrate the value of the methodology, the authors conclude by showing how a seemingly innocuous exogenous change in legal procedures has a surprising qualitative effect on the behavior of defendants and consequently on how frequently cases go to trial.

Document Details

  • Copyright: RAND Corporation
  • Availability: Web Only
  • Year: 1982
  • Pages: 27
  • Document Number: P-6809

Citation

Chicago Manual of Style

Salant, Stephen W. and Gregory J. Rest, Litigation of Questioned Settlement Claims: A Bayesian-Nash-Equilibrium Approach. Santa Monica, CA: RAND Corporation, 1982. https://www.rand.org/pubs/papers/P6809.html.
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