Sharing of Information Prior to Settlement or Litigation

Abstract

In this article the voluntary sharing of information prior to settlement negotiations is studied in a model where one type of litigant--plaintiffs, to be exact--possesses private information. In equilibrium, plaintiffs whose expected judgments would exceed a certain threshold will reveal their information (if they can credibly establish it) and settle for higher amounts than if they were silent; plaintiffs with lower expected judgments will remain silent and settle. The effect of the legal right of "discovery" is also examined.