Compensation for Damages and the Frequency of Litigation in the Context of Information Asymmetry on Risk Aversion between Parties
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TexteLangue : français Détails de publication : 2008.
Sujet(s) : Ressources en ligne : Abrégé : This paper examines the effect of information asymmetry on risk aversion between opposing parties in litigation, within a Bebchuck-type model. We will firstly analyze the case where the plaintiff is the informed party, by specifying the equilibrium with or without negotiation prior to the legal proceedings. We will then examine the model’s comparative statics, as well as the effect of the type of rule in place for paying out legal expenses. Lastly, we will discuss several extensions: the case in which the defendant is the informed party, the influence of the representation of litigants’ preferences, and the presence of comparative optimism bias or self-serving bias.
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This paper examines the effect of information asymmetry on risk aversion between opposing parties in litigation, within a Bebchuck-type model. We will firstly analyze the case where the plaintiff is the informed party, by specifying the equilibrium with or without negotiation prior to the legal proceedings. We will then examine the model’s comparative statics, as well as the effect of the type of rule in place for paying out legal expenses. Lastly, we will discuss several extensions: the case in which the defendant is the informed party, the influence of the representation of litigants’ preferences, and the presence of comparative optimism bias or self-serving bias.
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