The influence of present-biased plaintiffs' sophistication on endogenous timing and effort in litigation

Cat Lam Pham (University of Marburg)
Tim Friehe (University of Marburg)

Abstract

This paper analyzes the influence of the present-biased plaintiff's sophistication on the outcome of endogenous timing and efforts in litigation. The plaintiff can choose to invest legal effort earlier than or at the same time as the defendant. We show that the timing of action depends on the degree of present bias and the merit of the case. When the degree of present bias is intermediate, the naive plaintiff is more likely to act early (late) than the sophisticated one when the case's merit is in favor of the defendant (plaintiff). In the settlement stage, the naive plaintiff demands a higher a settlement offer from the defendant than the sophisticated one, and therefore is more likely to go to trial.

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