term 2 - litigation and delegation Flashcards
what is american rule?
what is english rule?
what is the expected payoff function of the plaintiff in the court stage under american rule?
what is the expected payoff function of the defendent in the court stage under american rule?
what is the CSF for the probability of winning the case?
what does Farmer and Pecorino (1999) present in their application of noisy contests in litigation?
what is the model of Farmer and Pecorino litigation contest?
a plantiff P and a defendant D play the following litigation game:
1) at the first stage P chooses whether to file a case against D or not. if P does not file then both parties obtain 0 payoff. if P files the case, game moves to stage two
2) at the second stage D chooses whether to defend the case or not. if D does not defend, the game ends and D pays J>0 to P. if D defends then the game moves to court. we model the court stage as a noisy contest where the legal expenses of the plaintiff (x>=0) and the defendant (y>=0) affect the outcome of the trial. both players are risk neutral.
what is the expected payoff function of the defendent in the court stage under english rule?
(1) P(x,y) is the CSF
what is the expected payoff function of the plaintiff in the court stage under english rule?
P(x,y) is given by the CSF
what is the best response of P to any y>=0 given by for american law?
where 2 and 3 are the payoff functions under american law for plaintiff and the defendant
what is the first order condition of the maximisation problem of D for american rule?
what do we find about legal fees in equillibrium for the american rule?
where 6 and 7 are expected payoff function differentiated to X and Y
what do we find about the probability of winning for american rule, how is this derived?
where 6 or 7 are the expected payoff function differentiated by X and y respectively
when does a pure strategy Nash equillibrium in the court stage (subgame) exist
Summarising, there exists a pure strategy Nash equilibrium in
the subgame (the court stage) with equilibrium efforts given by
(8) if and only if α ≤ 1 or α ∈ (1, 2) with 1/(α − 1) > θ > α − 1,
using (10) and (12).
When α ∈ (1, 2) but one of conditions (10) and (12) is violated,
the paper makes the assumption that:
I if θ > α − 1 but 1/(α − 1) ≤ θ, i.e., when the merits of the case
satisfy P ’s participation constraint but violates D’s, P gains a
first mover advantage,
I whereas, if θ ≤ α − 1 but 1/(α − 1) > θ, i.e., when the merits
of the case satisfy D’s participation constraint but violates P ’s,
D gains a first mover advantage.
I The implication of the assumption is that if merits satisfy P ’s
(D’s) constraint, but violates D’s (P ’s), the equilibrium payoff
of D (P ) in court is −J (0).
As the payoffs stated above can be gained by players in the
stages leading up to court, these cases will never be filed or not
defended if filed.
I In particular, if θ ≤ α − 1, P never files the case in the first
stage as he could gain 0 without proceeding to court, and
I if θ ≥ 1/(α − 1), D never defends in the second stage a case
that is filed as he could gain −J without proceeding to court.
I Note that, here the paper breaks the indifference between two
strategy profiles by favouring the earlier (at the game) equilib-
rium outcome.
what occurs under american rule in the second stage when
what occurs under american rule in the second stage when
what occurs under american rule in the second stage when
what occurs under american rule in the first stage when
what occurs under american rule in the first stage when
what occurs under american rule in the first stage when
how can the outcomes under american rule be demonstrated in a graph?
where θ is the merit of the case and α is the decisiveness parameter
what is the maximisation problem for P under english law and how is it derived
what is the maximisation problem for D under english law and how is it derievd?
what is the relation of legal fees for plaintiff and the defendant?
how can you solve for the values of x and y legal fees under english law?
where 14 is the plaintiffs FOC for the maximisation problem
what are the conclusions about x and y under english law?
what are the equillibrium payoff for the plaintiff P in english rule?
what are the equillibrium payoff for the defendant D in english rule?
what are the subgame perfect nash equillibrium of the game under english rule?
how can you graphically represent english law case for when court occurs, case filed occured and case not filed occurs?
how does american law compare vs english law for nuisance cases?
how does american law compare to englisih law for expenses?
