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TILEC Work in Progress: Xiaoyu Wang

Litigation and settlement under loss aversion
10:45-11:45, M 1003

In this paper, we investigate how loss aversion affects people's behavior in civil litigation. We find that a loss-averse plaintiff demands a higher offer for small claims to maintain her threat to proceed to trial compared to a loss-neutral plaintiff. For larger claims, a loss-averse plaintiff demands a lower offer to increase the settlement probability as loss pains her extra in trial. We also investigate how various policies affect loss-averse litigants' settlement decisions. Only a reduction in asymmetry of information about trial odds uniformly leads to higher settlement rates.



When: 27 February 2019 10:45

End date: 27 February 2019 11:45