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Hush Money

Author

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  • Andrew F. Daughety
  • Jennifer F. Reinganum

Abstract

We provide a simple incomplete-information model wherein an initially uninformed plaintiff makes a menu of settlement demands (one of which involves confidentiality) of the informed defendant. The defendant is informed about both his culpability in the harm suffered by the current plaintiff and the existence of other plaintiffs. The possibility that there are other plaintiffs the defendant might face improves the current plaintiff's bargaining position, as the likelihood of follow-on suits depends upon the visibility of the outcome of the case. For this reason, the defendant may be willing to be "hush money."

Suggested Citation

  • Andrew F. Daughety & Jennifer F. Reinganum, 1999. "Hush Money," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 661-678, Winter.
    • Handle: RePEc:rje:randje:v:30:y:1999:i:winter:p:661-678
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    Cited by:

    1. 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.
    2. David S. Kaplan & Joyce Sadka & Jorge Luis Silva‐Mendez, 2008. "Litigation and Settlement: New Evidence from Labor Courts in Mexico," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 5(2), pages 309-350, June.
    3. Andrew F. Daughety & Jennifer F. Reinganum, 2005. "Secrecy and Safety," American Economic Review, American Economic Association, vol. 95(4), pages 1074-1091, September.
    4. Eric Sjöberg, 2014. "Settlement under the threat of conflict-The cost of asymmetric information," Working Paper Series, Department of Economics, University of Utah 2014_02, University of Utah, Department of Economics.
    5. Philippe Choné & Laurent Linnemer, 2008. "Optimal Litigation Strategies with Signaling and Screening," Working Papers 2008-16, Center for Research in Economics and Statistics.
    6. Choné, Philippe & Linnemer, Laurent, 2010. "Optimal litigation strategies with observable case preparation," Games and Economic Behavior, Elsevier, vol. 70(2), pages 271-288, November.
    7. Keith Hylton & Sungjoon Cho, 2013. "Injunctive and reverse settlements in competition-blocking litigation," European Journal of Law and Economics, Springer, vol. 36(2), pages 243-269, October.

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