AN ASYMMETRIC INFORMATION MODEL OF LITIGATION

Keith N. Hylton

Boston University School of Law Working Paper 00-03

Abstract

This paper presents a cradle-to-grave model of tort liability, incorporating the decision to comply with the due-care standard, the decision to file suit, and the decision to settle. I use the model primarily to examine settlement rates, plaintiff win rates, and compliance with the due-care standard. The key results of the model are as follows: (1) litigation to judgment occurs only when some but not all actors comply with the due-care standard, and (2) if defendants have the information advantage at trial, plaintiff win rates generally will be less than fifty percent. I apply the model and its simulation results to several empirical issues in the litigation literature. The model simulation indicates that the British rule for allocating legal costs is superior to alternatives in terms of social welfare. In addition, the model is capable of explaining several empirical features of litigation and puzzles in the literature on trial outcomes.

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Keith N. Hylton Contact Information

knhylton@bu.edu
Boston University School of Law
765 Commonwealth Ave
Boston, MA 02215
USA
(617) 353-8959

Presentation and Publication Information:

To be announced.


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