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Mutual Optimism And Risk Preferences In Litigation, Keith N. Hylton
Mutual Optimism And Risk Preferences In Litigation, Keith N. Hylton
Faculty Scholarship
Why do some legal disputes fail to settle? From a bird’s eye view, the literature offers two categories of reasons. One consists of arguments based on informational disparities. The other consists of psychological arguments. This paper explores the psychological theory. It presents a model of litigation driven by risk preferences and examines the model’s implications for trials and settlements. The model suggests a foundation in Prospect Theory for the Mutual Optimism model of litigation. The model’s implications for plaintiff win rates, settlement patterns, and informational asymmetry with respect to the degree of risk aversion are examined.
The Economics Of Third-Party Financed Litigation, Keith N. Hylton
The Economics Of Third-Party Financed Litigation, Keith N. Hylton
Faculty Scholarship
This paper examines the law and economics of third-party financed litigation. I explore the conditions under which a system of third-party financiers and litigators can enhance social welfare, and the conditions under which it is likely to reduce social welfare. Among the applications I consider are the sale of legal rights (such as contingent tort claims) to insurers, to patent trolls, and to financiers generally