Harrison, L&E nutshell, chapter 7.

The Economics of Settlements, p. 215

95% of cases settle.

A settlement is a contract.

Exchanges take place when there is a surplus.

From avoiding the costs of a trial.

A settlement: the plaintiff sells his right to sue, to the defendant.

Settlements are bilateral monopolies.


The parties have an incentive to bluff.

To claim they would not settle for anything other than the amount that

allows them to capture most of the benefit of the settlement.

A negotiator may want to establish a reputation for being tough.

People place a value on being treated fairly.