Miceli, Thomas J. --- "Dispute Resolution" [2005] ELECD 150; in Backhaus, G. Jürgen (ed), "The Elgar Companion to Law and Economics, Second Edition" (Edward Elgar Publishing, 2005)

Book Title: The Elgar Companion to Law and Economics, Second Edition

Editor(s): Backhaus, G. Jürgen

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845420321

Section: Chapter 26

Section Title: Dispute Resolution

Author(s): Miceli, Thomas J.

Number of pages: 12

Extract:

26 Dispute resolution
Thomas J. Miceli*


Introduction
Economists are interested in the resolution of legal disputes for several rea-
sons. First, the manner in which parties resolve their disputes (whether by
settlement or trial) has an effect on the cost of operating the legal system.
Second, economic theory can explain how parties will resolve their disputes
(positive analysis), and can therefore prescribe procedural rules for lowering
the cost of dispute resolution (normative analysis). Finally, legal disputes
provide the raw material from which courts make new legal rules or reaffirm
old ones. These rules in turn serve as guides for decisions that affect the rate
at which disputes will arise in the future (for example, investment in precau-
tion against accidents).
This entry examines the economic analysis of the way legal disputes are
resolved. It begins by examining the settlement­trial decision. The analysis
shows that settlement will be the predominant outcome given the mutual gain
to the parties from avoiding litigation costs. In order to explain the existence
of trials, researchers have proposed the existence of differing perceptions or
asymmetric information by the parties regarding the outcome of a trial.
The resulting models offer insights into various methods for controlling
the costs of litigation. In this context, we examine the practice of pre-trial
discovery and cost shifting under the English Rule and Rule 68 of the Federal
Rules of Civil Procedure. The discussion then turns to the question of whether
there is too much litigation from a social perspective, ...