Title       : Information Economics, Confidential Settlement Bargaining and Judicial
               Decision-Making
Type        : Award
NSF Org     : SES 
Latest
Amendment
Date        : February 6,  2004   
File        : a0239908

Award Number: 0239908
Award Instr.: Continuing grant                             
Prgm Manager: Nancy A. Lutz                           
	      SES  DIVN OF SOCIAL AND ECONOMIC SCIENCES    
	      SBE  DIRECT FOR SOCIAL, BEHAV & ECONOMIC SCIE
Start Date  : March 1,  2003      
Expires     : February 28,  2005   (Estimated)
Expected
Total Amt.  : $169128             (Estimated)
Investigator: Andrew F. Daughety andrew.f.daughety@vanderbilt.edu  (Principal Investigator current)
              Jennifer F. Reinganum  (Co-Principal Investigator current)
Sponsor     : Vanderbilt University
	      Station B Box 7749
	      Nashville, TN  372357749    615/322-2631

NSF Program : 1320      ECONOMICS
Fld Applictn: 
Program Ref : ,0000,OTHR,
Abstract    :

     This research will use methods from game theory and information economics
     to examine two important aspects of the legal system and their implications for
     market and judicial efficiency.  One topic is the impact of confidential
     settlements on performance in markets for goods and services.  This research
     will address the market implications of this settlement option as well as
     alternative private and public policies to address what has come to be a
     significant concern:  that allowing confidential settlement protects and
     encourages bad behavior by agents in a variety of markets.  Alternatively,
     banning confidentiality may also compromise important values, such as personal
     privacy and the protection of intellectual property via trade secrecy; without
     the ability to conclude confidential settlements, some important cases may
     never be brought, and fewer of those brought are likely to settle.  It is
     important to identify these tradeoffs and their implications for market
     performance in order that sensible public policy can be pursued (by judges and
     legislators).  The second topic concerns how differences in information among
     litigants and judges affect the outcomes of individual cases and, ultimately,
     the evolution of the law.  The judicial process is inherently passive:  suits
     must be filed and appeals made in order for courts to be able to clarify rules
     and make/interpret law.  When law is made, or interpreted, by a sequence of
     courts (as is true in our system), the effectiveness of correctives (such as
     appeal) may be attenuated by problems of insufficient resources or unwieldy
     organization.

     The study will address a number of important policy issues.
     In the context of confidential settlements, does allowing confidential
     settlements adversely affect pricing and safety?  Are there private responses
     to such inefficiencies that firms can make (e.g., can firms credibly, and
     profitably, commit to eschew confidential settlements?), or is new public
     policy necessary (such as banning confidentiality)?  Does current law, such as
     the doctrine of vicarious liability (wherein, for example, corporations are
     liable for harms caused by employees' job-related actions), ameliorate or
     exacerbate the use of confidential settlements to hide the bad behavior of
     economic agents?  In the context of modeling decision-making by courts, how
     does information get aggregated in hierarchical court systems?  What
     competitive forces determine which cases receive higher-court review
     (essentially, how does the "market for certiorari" operate?)?  To what degree
     will judicial inefficiency be systematic and persistent, or when will
     institutionalized correctives (such as judicial dissent) work to promote
     judicial efficiency?  This research on information aggregation by courts
     contributes to understanding how courts function, how the law evolves, what may
     contribute to judicial inefficiency and what actions or policies may remedy
     such problems.