Società Italiana di Diritto ed Economia, SIDE - ISLE 2015 - 11TH ANNUAL CONFERENCE

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costly pretrial agreements
giovanni immordino

Last modified: 2015-12-15


Legal disputes are either settled or end up in Court. We argue below that the time and money the parties to a dispute have to invest prior to the pretrial negotiation is the key factor in determining the likelihood that a dispute will end up in Court.

If litigants have to incur ex-ante costs in order to reach the negotiation stage that might yield a pretrial settlement and the distribution of these costs is sufficiently mismatched with respect to the distribution of the litigants' bargaining powers, then a pretrial agreement may never be reached even though it is overall wasteful to end up in Court.

We further show that the likelihood to end up in Court is unaffected by the way trial costs are distributed among the litigants (e.g. English Rule or American Rule) provided these costs are fully anticipated at the pretrial negotiation stage. In other words, the likelihood of going to trial is unaffected
by the choice of the fee-shifting rule.

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