Abstract
This article analyzes the pretrial settlement process among an uninformed plaintiff and multiple defendants who share information about the winning chances of their cases. We show that when the chances are negatively correlated, cross-type subsidization occurs to circumvent the possibility of signal jamming, that is, the settlement offer of a strong defendant (a weak defendant) is distorted upward (downward), as far as the no-distortion equilibrium is not viable. In this equilibrium, the plaintiff settles with defendants with probability one.
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Kim, JY., Song, J. Signal Jamming in Pretrial Negotiation with Multiple Defendants. J Econ 91, 177–200 (2007). https://doi.org/10.1007/s00712-006-0254-y
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DOI: https://doi.org/10.1007/s00712-006-0254-y