A dynamic model of lawsuit joinder and settlement

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Andrew F. Daughety andJennifer F. Reinganum
The RAND Journal of Economics
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We model the dynamic process wherein two privately informed plaintiffs may file and combine related lawsuits in order to lower trial costs and/or improve the likelihood of winning. The equilibrium resembles a “bandwagon”: some plaintiff types file early, whereas others wait and only file suit if they observe a previous filing. Finally, some plaintiff types never file and some early filers drop their suits if not joined by another plaintiff. We then consider the effect of allowing preemptive settlement offers by the defendant aimed at discouraging follow-on suits. Preemptive settlement results in a “gold rush” of cases into the first period.
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