Civil Litigation with Mandatory Discovery and Voluntary Transmission of Private Information

We consider models of pretrial negotiations where both costly voluntary disclosure and costly mandatory discovery are possible. When the uninformed party makes the final offer (the screening game), mandatory discovery will be utilized if it is not very costly, but voluntary disclosure will not occur in the absence of a discovery procedure. When the informed party makes the final offer (the signaling game), mandatory discovery is never utilized, but voluntary disclosure will be utilized if it is not too costly to do so. Thus, mandatory discovery is effective in the information structure under which voluntary disclosure is not and vice versa. The results suggest that, taken together, the two institutions will lead to a great deal of information revelation and will significantly increase the probability of settlement.