Wednesday, March 19, 2008

Macey-Dare on Litigation Costs, Settlements, and Game Theory

Posted by Jeff Lipshaw

Rupert Macey-Dare (St. Cross College, Oxford) has posted Litigation Cost Strategies, Settlement Offers and Game Theory on SSRN.  Here's the abstract:

Starting with a simple economic model of the value of civil litigation from each side's perspective, this paper analyses a wide range of potential litigation cost strategies, settlement offers and negotiations, together with relevant applications and insights from game theory. Specific issues examined include: optimal settlement agreements, optimal settlement timing, optimal choice of lawyers; principal-agent problems aligning lawyer cost incentives; optimal client-lawyer contracts; "Conditional Fee Agreements" (CFAs); success rules and size of success premia; the exploitation and mitigation of liquidity and bankruptcy constraints; impact of collateral, "Security for Costs" and "Freezing Orders"; optimal "Part 36 Offers"; public and "without prejudice" offers; fixed rate and state-contingent offers; the role of mediation and alternative dispute resolution (ADR); the effect of litigant group size, co-ordination and class actions; rationale for confidential no-liability settlement agreements; effects of legal aid; time-value to trial and optionality of news; the impact of the "Law of Costs"; optimal trial cost applications and requests for "leave to appeal". Both familiar and paradoxical new results are confirmed by the analysis

http://lawprofessors.typepad.com/legal_profession/2008/03/macey-dare-on-l.html

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