Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56834
Authors: 
Miettinen, Topi
Ropponen, Olli
Sääskilahti, Pekka
Year of Publication: 
2011
Series/Report no.: 
Jena economic research papers 2011,022
Abstract: 
We exploit a controlled frameless laboratory experiment to study settlement negotiations and the plaintiff's decision to raise a lawsuit in case of an impasse. We find that greater variance in court outcomes increases the litigation rate and lowers the settlement rate. This latter finding goes against the received wisdom and earlier experimental evidence (Ashenfelter et al. 1992) that greater risk in arbitration outcomes increases the settlement rate. We find that self-serving biases about the protagonist' course of action are accountable for the lower settlement rate, while an impasse payoff inferior to that of the defendant induces the plaintiffs to excessive risk-taking in an attempt to narrow the gap.
Subjects: 
bargaining
litigation
loss-aversion
self-serving bias
settlement
JEL: 
C72
C9
K41
Document Type: 
Working Paper

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