Bargaining in the Shadow of the Law: A Testable Model of Strategic Behavior
![handle is hein.journals/legstud11 and id is 229 raw text is: BARGAINING IN THE SHADOW OF THE
LAW: A TESTABLE MODEL OF STRATEGIC
BEHAVIOR
ROBERT COOTER and STEPHEN MARKS with ROBERT MNOOKIN*
PRETRIAL bargaining may be described as a game played in the shadow
of the law. There are two possible outcomes: settlement out of court
through bargaining, and trial, which represents a bargaining breakdown.
The courts encourage private bargaining but stand ready to step from the
shadows and resolve the dispute by coercion if the parties cannot agree.
Bargaining is successful from an economic viewpoint if an efficient solu-
tion to the dispute is found at little cost. In technical language, a dispute is
resolved successfully if a solution is found on the contract curve with little
expenditure on search.
The usual approach to bargaining in the legal setting assumes that trial
is caused by excessive optimism on the part of plaintiff and defendant. ' If
both parties are optimistic, then there is no way to split the stakes so that
each receives as much as he or she expects to gain from trial. In these
circumstances, trial is inevitable.
* The paper's title is borrowed from Robert N. Mnookin & Lewis Kornhauser, Bargain-
ing in the Shadow of the Law: The Case of Divorce, 88 Yale L. J. 950 (1979). We received
helpful criticism of the paper from the law and economics workshop at the University of
Chicago. The ideas in the paper were originally presented at seminars in the economics
departments at California Institute of Technology and the University of California at San
Diego. The research was funded by a grant from the Center for Law and Economic Study,
Columbia University School of Law, whose director is Lewis Kadin.
I The theory that trial in civil suits occurs because of optimism is developed in John P.
Gould, The Economics of Legal Conflicts, 2 J. Legal Stud. 279 (1973); Richard A. Posner,
An Economic Approach to Legal Procedure and Judicial Administration, 2 J. Legal Stud.
399 (1974), esp. at 419 n. 29. This model of litigation is expanded in William M. Landes &
Richard A. Posner, Adjudication as a Private Good, 8 J. Legal Stud. 235 (1979). A clear
summary of the theory is in Richard A. Posner, Economic Analysis of Law 434-400 (2d ed.
1977) [Hereinafter cited as Economic Analysis]. A similar analysis of the cause of trial in
criminal cases is found in William M. Landes, An Economic Analysis of the Courts, 14 J.
Law & Econ. 61 (1971).
[Journal of Legal Studies, vol. XI (June 1982)]
© 1982 by The University of Chicago. All rights reserved. 0047-2530/82/1102-0011$01.50](ViewImageLocal?handle=hein.journals/legstud11&div=15&collection=&method=preview&ext=.png&size=3)
What Is HeinOnline?
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most
Bargaining in the Shadow of the Law: A Testable Model of Strategic Behavior
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most