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The Evolution and Persistence of Optimism in Litigation

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  • Oren Bar-Gill

Abstract

Empirical evidence suggests that lawyers and litigants are systematically optimistic with respect to the outcome at trial. Using evolutionary game theory, this article seeks to provide a theoretical explanation for the persistence of the optimism bias. The adaptive force of optimism derives from its function as a commitment device in the pretrial bargaining stage. Optimistic lawyers, by credibly threatening to resort to costly litigation, succeed in extracting more favorable settlements. Therefore, market-selection forces and cultural transmission dynamics dictate an equilibrium with a positive level of optimism. Understanding the dynamics leading to optimism provides new insight regarding the different factors that influence the level of this cognitive bias. In particular, it is shown that the design of legal rules affects the equilibrium level of optimism, which in turn affects the relative efficiency of the different legal designs. Methodologically, by enabling a more systematic exploration of the perception-shaping role of the law, this article seeks to expand the conventional boundaries of behavioral law and economics. Copyright 2006, Oxford University Press.

Suggested Citation

  • Oren Bar-Gill, 2006. "The Evolution and Persistence of Optimism in Litigation," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 22(2), pages 490-507, October.
    • Handle: RePEc:oup:jleorg:v:22:y:2006:i:2:p:490-507
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    File URL: http://hdl.handle.net/10.1093/jleo/ewj016
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    Citations

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    Cited by:

    1. J.J. Prescott & Kathryn E. Spier & Albert Yoon, 2014. "Trial and Settlement: A Study of High-Low Agreements," Journal of Law and Economics, University of Chicago Press, vol. 57(3), pages 699-746.
    2. Maxime Menuet & Petros G. Sekeris, 2021. "Overconfidence and conflict," Economic Inquiry, Western Economic Association International, vol. 59(4), pages 1483-1499, October.
    3. J.J. Prescott & Kathryn E. Spier & Albert Yoon, 2014. "Trial and Settlement: A Study of High-Low Agreements," NBER Working Papers 19873, National Bureau of Economic Research, Inc.
    4. Giuseppe Dari-Mattiacci & Bruno Deffains, 2007. "Uncertainty of Law and the Legal Process," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(4), pages 627-656, December.
    5. Bar, Talia & Kalinowski, Jesse, 2019. "Patent validity and the timing of settlements," International Journal of Industrial Organization, Elsevier, vol. 67(C).
    6. Stremitzer, Alexander, 2008. "Plaintiffs exploiting Plaintiffs," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 224, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    7. Konrad, Kai A. & Morath, Florian, 2016. "Bargaining with incomplete information: Evolutionary stability in finite populations," Journal of Mathematical Economics, Elsevier, vol. 65(C), pages 118-131.
    8. Zhou, J., 2010. "Access to justice : An economic approach," Other publications TiSEM 9d70f451-35c4-4878-92bf-7, Tilburg University, School of Economics and Management.
    9. Deffains, Bruno & Langlais, Eric, 2008. "Legal Interpretative Process and Litigants’ Cognitive Biases," MPRA Paper 14370, University Library of Munich, Germany.
    10. Dari-Mattiacci, Giuseppe & Deffains, Bruno & Lovat, Bruno, 2011. "The dynamics of the legal system," Journal of Economic Behavior & Organization, Elsevier, vol. 79(1-2), pages 95-107, June.
    11. Bruno Deffains & Eric Langlais, 2009. "Legal Interpretative Process and Litigants’ Cognitive Biases," Working Papers hal-04140887, HAL.
    12. Baharad, Roy & Cohen, Chen & Nitzan, Shmuel, 2022. "Litigation with adversarial efforts," International Review of Law and Economics, Elsevier, vol. 69(C).
    13. Joshua C. Teitelbaum, 2007. "A Unilateral Accident Model under Ambiguity," The Journal of Legal Studies, University of Chicago Press, vol. 36(2), pages 431-477, June.

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