Support from National Science Foundation grant no. SES08-14312 is gratefully acknowledged. We thank the editor James Hosek, Kathryn Spier, and two anonymous referees; participants in the American Law and Economics Association 2010 Meetings, the Summer Workshop in Industrial Organization 2009 at the University of Auckland, the Third Annual Triangle Law and Economics Conference at Duke University, PET-09 Galway, and the NBER Summer Workshop on Law and Economics; and seminar audiences at Deakin University, Universitat Autònoma de Barcelona, Universidad Carlos III de Madrid, the University of Melbourne, the University of Queensland, the University of Sydney, the University of South Florida, the University of Tennessee, and Vanderbilt University for comments on earlier drafts.
A dynamic model of lawsuit joinder and settlement
Article first published online: 12 SEP 2011
© 2011, RAND.
The RAND Journal of Economics
Volume 42, Issue 3, pages 471–494, Fall 2011
How to Cite
Daughety, A. F. and Reinganum, J. F. (2011), A dynamic model of lawsuit joinder and settlement. The RAND Journal of Economics, 42: 471–494. doi: 10.1111/j.1756-2171.2011.00142.x
- Issue published online: 12 SEP 2011
- Article first published online: 12 SEP 2011
We model the dynamic process wherein two privately informed plaintiffs may file and combine related lawsuits in order to lower trial costs and/or improve the likelihood of winning. The equilibrium resembles a “bandwagon”: some plaintiff types file early, whereas others wait and only file suit if they observe a previous filing. Finally, some plaintiff types never file and some early filers drop their suits if not joined by another plaintiff. We then consider the effect of allowing preemptive settlement offers by the defendant aimed at discouraging follow-on suits. Preemptive settlement results in a “gold rush” of cases into the first period.