Chapter 4 Litigation The purpose of this chapter is to survey the academic literature on the economics of litigation and to synthesize its main themes. The chapter begins by introducing the basic economic framework for studying litigation and out of court settlement. One set of issues addressed is positive (or descriptive) in nature. Under what conditions will someone decide to file suit What determines how much is spent on a lawsuit When do cases settle out of court Important normative issues are also addressed. Are the litigation decisions made by private parties in the interest of society as a whole Next the chapter surveys some of the more active areas in the litigation literature. Topics include rules of evidence loser pays rules appeals contingent fees for attorneys alternative dispute resolution class actions and plea bargaining.