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An Empirical Analysis of the Signaling and Screening Models of Litigation

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  • Paul Pecorino
  • Mark Van Boening

Abstract

We present an experimental analysis of the signaling and screening models of litigation. In both models, bargaining failure is driven by asymmetric information. The difference between the models lies in the bargaining structure: In the signaling game, the informed party makes the final offer, while in the screening game the uninformed party makes the final offer. We conduct experiments for both models under a common set of parameter values, allowing only the identity of the party making the final offer to change. We find the anomalous behavior to be more common in the signaling game, but the frequency of this behavior diminishes in the later rounds of the experiment. Across both games, in the later rounds of the experiment over 90% of offers are consistent with the theory. Having the right to make the offer raises a player’s expected payoffs, but by much less than is predicted by theory. Dispute rates across the two games are approximately equal.

Suggested Citation

  • Paul Pecorino & Mark Van Boening, 2018. "An Empirical Analysis of the Signaling and Screening Models of Litigation," American Law and Economics Review, American Law and Economics Association, vol. 20(1), pages 214-244.
    • Handle: RePEc:oup:amlawe:v:20:y:2018:i:1:p:214-244.
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    File URL: http://hdl.handle.net/10.1093/aler/ahy002
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    Cited by:

    1. Baharad, Roy & Cohen, Chen & Nitzan, Shmuel, 2022. "Litigation with adversarial efforts," International Review of Law and Economics, Elsevier, vol. 69(C).
    2. Cary Deck & Paul Pecorino & Michael Solomon, 2024. "Litigation with negative expected value suits: An experimental analysis," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 21(2), pages 244-278, June.

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