with Muhamet Yildiz. RAND Journal of Economics, Vol. 50, No. 2 (Summer 2019)
Empirical evidence shows that equally informed, experienced negotiators may refuse to settle because they fundamentally disagree on each one’s probability of success.
We study the dynamics of agreement to settle in pretrial negotiations when the negotiating parties are both optimistic and new information may arrive at any point.
We characterize the conditions under which the negotiators do or do not reach an agreement at every period of negotiation and discuss the implications for policy design such as timing periods of discovery and jury selection, and whether or not to allow the winning party to recover the legal costs incurred from the losing party.