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1994

Dispute Resolution and Arbitration

Vanderbilt University Law School

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Full-Text Articles in Law

Opening Offers And Out-Of-Court Settlement: A Little Moderation May Not Go A Long Way, Chris Guthrie, Russell Korobkin Jan 1994

Opening Offers And Out-Of-Court Settlement: A Little Moderation May Not Go A Long Way, Chris Guthrie, Russell Korobkin

Vanderbilt Law School Faculty Publications

When two litigants resolve a dispute through out-of-court settlement rather than trial, they realize joint gains of trade equal to the sum of the costs both parties would have incurred had they obtained a trial judgment minus the costs they incur reaching settlement. This opportunity for mutual gain causes most civil lawsuits to settle out-of-court. Yet, in spite of the opportunity for joint gain, negotiations fail in a significant number of lawsuits. One reason for this surprising result is that even when joint gains are substantial and obvious to the litigants, they still must agree on a method of dividing ...


Psychological Barriers To Litigation Settlement: An Experimental Approach, Chris Guthrie, Russell Korobkin Jan 1994

Psychological Barriers To Litigation Settlement: An Experimental Approach, Chris Guthrie, Russell Korobkin

Vanderbilt Law School Faculty Publications

The traditional economic model of settlement breakdown -- as developed by Priest and Klein -- provides an important first step in understanding why some lawsuits settle and others go to trial. Rational miscalculation undoubtedly pushes some litigants into court who might otherwise reach out-of-court settlement. Absent miscalculation, however, some litigants still find themselves in court. We have presented experimental evidence suggesting that these litigants may proceed to trial because psychological barriers to value maximizing behavior impede their settlement efforts. Indeed, our research empirically grounds the hypothesis that psychological barriers are powerful causal agents of trials. The usefulness of this evidence does not ...