Researchers who have approached this question from the standpoint of economics, have generally described the category of cases that proceed to trial as resulting from a breakdown in negotiations or informational asymmetry. The breakdown often relates to a failure by one or both parties to understand the risk dynamics in terms of the law and the evidence. Economists predict that any given set of litigants, when provided with full information about the evidence and the applicable law, would be able to accurately and objectively assess the risk of proceeding to trial. These litigants would tend to settle every case, and would tend not to proceed to trial, assuming they were properly informed.¹ Thus, in a case that proceeds to trial, the economic approach would attribute the failure of the parties to settle the case to one or both of the parties not fully understanding what the case was about, the evidence, or the applicable law, all of which serve to inform the risk dynamics of proceeding to trial. If the parties were acting rationally and had a full understanding of the risk, they would mutually define a zone of bargaining, and would inevitably reach a settlement point somewhere within that zone, because both sides would see that it would be to their benefit to do so.²
However, researchers within the disciplines of psychology, behavior studies, and related fields, have questioned whether other factors may be at play in the failure of certain cases to settle. In particular, research has been focused on psychological barriers to settlement that cannot be explained by a rational assessment of the costs versus the benefits, or by a breakdown in understanding the risk by one or both parties. While it may be obvious to many litigants and practicing lawyers that there is more at stake in some litigation than just money, it is not so obvious to legal scholars or to economists.
Therefore the experimental proof of this intuition is significant not only because it facilitates a more scientific understanding of the human factors at play in dispute resolution, but because it also reveals some of the specific mechanics of how non-monetary factors can influence litigants’ decision-making. In other words, this type of research may eventually allow us to catalog and understand most of the factors that affect decision-making in alternative dispute resolution, and thereby render alternative dispute resolution more predictable and more effective.
¹ See, e.g., Robert Cooter et al., Bargaining in the Shadow of the Law: A Testable Model of Strategic Behavior, 11 J. Legal Stud. 225, 225 (1982); Samuel R. Gross & Kent D. Syverud, Getting To No: A Study of Settlement Negotiations and the Selection of Cases for Trial, 90 Mich. L. Re., 319, 320 (1991).
² Russell Korobkin, “A Positive Theory of Legal Negotiation” (June 2000) 88:6 Georgetown LJ 1789 at 1792.