American Law and Economics Review Advance Access published online on June 8, 2009
American Law and Economics Review, doi:10.1093/aler/ahp004
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Who Wins in Settlement Negotiations?
UCLA School of Law
UCLA School of Law Empirical Research Group
Send correspondence to: Russell Korobkin: UCLA School of Law, 405 Hilgard Avenue, Los Angeles, CA 90095, USA; E-mail: korobkin{at}law.ucla.edu.
JEL Classification: C78, C92, D03, D74, D86, K12, K41
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Abstract |
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When lawsuits are resolved out of court, what determines the settlement price? This article uses a laboratory simulation and path analysis to estimate the relative importance of measurable variables in determining who wins the battle for the cooperative surplus. In the simulated negotiation conditions, seven variables explained more than half of the variation in settlement outcomes achieved by participants, with negotiators’ predictions of their opponent's reservation prices the most important, followed by negotiator gender and amount of first offer. Although the specific context of this article is settlement, the insights generated are applicable to any two-party, distributive negotiation.
Eric Talley provided substantial help in conceptualizing the project. Comments and advice from participants in workshops and presentations at the UCLA School of Law, the UCLA Anderson School of Business, the Case Western School of Law, Vanderbilt Law School, and Harvard Law School, the 2007 Conference on Empirical Legal Studies, and the 2009 American Law and Economics Association Annual Meeting, as well as Chris Guthrie, Robert Mnookin, and Donna Shestowsky, and two anonymous reviewers are gratefully acknowledged. Heather Richardson and Brad Flood provided excellent research assistance.