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Why Wait to Settle? An Experimental Test of the Asymmetric-Information Hypothesis

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  • Sean P. Sullivan

Abstract

The US legal system encourages civil litigants to quickly settle their disputes, yet lengthy and expensive delays often precede private settlements. The causes of these delays are uncertain. This paper describes an economic experiment designed to test one popular hypothesis: that asymmetric information might be a contributing cause of observed settlement delays. Experimental results provide strong evidence that asymmetric information can delay settlements, increasing average time to settlement by as much as 90 percent in some treatments. This causal relationship is robustly observed across different bargaining environments. On the other hand, results do not obviously confirm all aspects of the game-theoretic explanation for this relationship and suggest that asymmetric information may be only one of several contributing causes of settlement delay.

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  • Sean P. Sullivan, 2016. "Why Wait to Settle? An Experimental Test of the Asymmetric-Information Hypothesis," Journal of Law and Economics, University of Chicago Press, vol. 59(3), pages 497-525.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/689704
    DOI: 10.1086/689704
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    Cited by:

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    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.
    3. Arena, Matteo P. & Ferris, Stephen P., 2018. "A global analysis of corporate litigation risk and costs," International Review of Law and Economics, Elsevier, vol. 56(C), pages 28-41.
    4. Karagözoğlu, Emin & Keskin, Kerim, 2018. "Time-varying fairness concerns, delay, and disagreement in bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 147(C), pages 115-128.
    5. Sayantan Ghosal & Marcus Miller & Kannika Thampanishvong, 2019. "Waiting for a haircut? A bargaining perspective on sovereign debt restructuring," Oxford Economic Papers, Oxford University Press, vol. 71(2), pages 405-420.
    6. Guha, Brishti, 2019. "Malice in pretrial negotiations," International Review of Law and Economics, Elsevier, vol. 58(C), pages 25-33.

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