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The Appeal Decision and Settlement Bargaining

Ansgar Wohlschlegel Orcid Logo

Economic Theory

Swansea University Author: Ansgar Wohlschlegel Orcid Logo

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DOI (Published version): 10.1007/s00199-025-01687-9

Abstract

This paper analyses settlement bargaining under incomplete information when an appeal is possible. Litigants may engage in pretrial and, before reaching the appeals court, posttrial settlement bargaining. In the latter, both litigants utilise the information revealed at earlier stages, introducing t...

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Published in: Economic Theory
ISSN: 0938-2259 1432-0479
Published: Springer Science and Business Media LLC 2025
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URI: https://cronfa.swan.ac.uk/Record/cronfa70539
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last_indexed 2025-10-31T18:12:45Z
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spelling 2025-10-30T15:26:16.5890452 v2 70539 2025-09-30 The Appeal Decision and Settlement Bargaining 87ee897c09a7541373f481f55c9b55da 0000-0001-7620-2539 Ansgar Wohlschlegel Ansgar Wohlschlegel true false 2025-09-30 SOSS This paper analyses settlement bargaining under incomplete information when an appeal is possible. Litigants may engage in pretrial and, before reaching the appeals court, posttrial settlement bargaining. In the latter, both litigants utilise the information revealed at earlier stages, introducing the following effects: First, a defendant rejecting the pretrial settlement reveals having a strong case. Hence, a higher pretrial settlement rate weakens the plaintiff's average case, thereby reducing her posttrial equilibrium payoff (strategic effect). Second, the trial judgment is a noisy public signal of the appeals judgment. Hence, winning at trial makes a litigant stronger in posttrial settlement bargaining (information effect). Unlike in the standard single-stage model of settlement bargaining, I find that lower legal costs may not always reduce settlement incentives and that the allocation of legal costs between litigants may matter. Additionally, a stronger correlation between judgments on both court levels weakens the strategic effect. Journal Article Economic Theory 0 Springer Science and Business Media LLC 0938-2259 1432-0479 Appeals; Litigation; Settlement; Bargaining 14 10 2025 2025-10-14 10.1007/s00199-025-01687-9 COLLEGE NANME Social Sciences School COLLEGE CODE SOSS Swansea University SU Library paid the OA fee (TA Institutional Deal) Swansea University 2025-10-30T15:26:16.5890452 2025-09-30T07:28:54.0350440 Faculty of Humanities and Social Sciences School of Social Sciences - Economics Ansgar Wohlschlegel 0000-0001-7620-2539 1 70539__35512__52c50892729e498b91f8bd4952efb6a7.pdf 70539.VoR.pdf 2025-10-30T15:23:24.4730036 Output 744952 application/pdf Version of Record true © The Author(s) 2025. This article is licensed under a Creative Commons Attribution 4.0 International License. true eng http://creativecommons.org/licenses/by/4.0/
title The Appeal Decision and Settlement Bargaining
spellingShingle The Appeal Decision and Settlement Bargaining
Ansgar Wohlschlegel
title_short The Appeal Decision and Settlement Bargaining
title_full The Appeal Decision and Settlement Bargaining
title_fullStr The Appeal Decision and Settlement Bargaining
title_full_unstemmed The Appeal Decision and Settlement Bargaining
title_sort The Appeal Decision and Settlement Bargaining
author_id_str_mv 87ee897c09a7541373f481f55c9b55da
author_id_fullname_str_mv 87ee897c09a7541373f481f55c9b55da_***_Ansgar Wohlschlegel
author Ansgar Wohlschlegel
author2 Ansgar Wohlschlegel
format Journal article
container_title Economic Theory
container_volume 0
publishDate 2025
institution Swansea University
issn 0938-2259
1432-0479
doi_str_mv 10.1007/s00199-025-01687-9
publisher Springer Science and Business Media LLC
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Social Sciences - Economics{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Social Sciences - Economics
document_store_str 1
active_str 0
description This paper analyses settlement bargaining under incomplete information when an appeal is possible. Litigants may engage in pretrial and, before reaching the appeals court, posttrial settlement bargaining. In the latter, both litigants utilise the information revealed at earlier stages, introducing the following effects: First, a defendant rejecting the pretrial settlement reveals having a strong case. Hence, a higher pretrial settlement rate weakens the plaintiff's average case, thereby reducing her posttrial equilibrium payoff (strategic effect). Second, the trial judgment is a noisy public signal of the appeals judgment. Hence, winning at trial makes a litigant stronger in posttrial settlement bargaining (information effect). Unlike in the standard single-stage model of settlement bargaining, I find that lower legal costs may not always reduce settlement incentives and that the allocation of legal costs between litigants may matter. Additionally, a stronger correlation between judgments on both court levels weakens the strategic effect.
published_date 2025-10-14T05:26:50Z
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score 11.090009

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