at trial depends on the relative cost of going to trial as opposed to settling, the position of the decision standard used by the court with respect to the distribution of parties’ behavior, and the variance of the error in the signals parties receive about the merits of the case. Using data from federal civil cases in the Southern District of New York, which are assigned randomly to judges in the jurisdiction, he is able to identify the e¤ect that the judge (who a¤ects the decision standard and the level of uncertainty faced by the parties) has on the relationship between the rate of settlement and the likelihood of plainti¤ prevailing in court. He ...nds a strong relationship between the rate of settlement and plainti¤’s win rate, and signi...cant variation across judges in both, especially in disputes for which the law is perceived to be less clear.

Eisenberg and Farber (1997) assume an underlying distribution of litigation costs for potential litigants, and consider the e¤ects of changes in this distribution on rates of settlement and success at trial. They show that as the variance of potential plainti¤’s trial costs increases, the rate of settlement decreases and the success of plainti¤s at trial falls. They test this result using data from civil suits in federal district courts, and ...nd that individuals, who have a more variable distribution of litigation costs than corporations, are less likely to settle as plainti¤s and also less likely to win at trial.

# II.C Other Empirical Evidence

Some evidence about the di¤erences in underlying characteristics and success rates between tried and settled cases can be found in a number of studies that examine litigation trends and costs in particular areas of law. In general, this literature ...nds that average compensation in tried cases is higher than in settled cases. Our study ...nds that average compensation in tried cases is slightly higher in one tribunal, and lower in the other tribunal. However, we ...nd that recovery as a percentage of the original claim is signi...cantly lower for tried cases. Unfortunately, by and large the empirical literature to date has not controlled for the amount of the original claim; therefore the measure of success used in most of the previous work is not directly comparable with ours. There are, however, a few studies that ...nd a much higher compensation ratio of trial to settlement than our data displays. After reviewing several relevant studies, we will attempt to provide some explanations of the di¤erences between their results and ours.

Kakalik, et. al. (1984) study the determinants of compensation received in a sample of 513 asbestos injury related lawsuits between January 1980 and August 1982. The authors conducted a survey of plainti¤s’attorney, defendants, and insurers for all tried cases during this period, in addition to a random sample of claims that closed before trial either by settlement or by being dropped. They ...nd that on average trials resulted in ...nal payments that were more than two times greater than the compensation received by plainti¤s in cases that settled before trial. No data on the amount of compensation initially requested by the plainti¤ is given, although the study controls for type of asbestos-related illness, job type, age, sex, marital status, and whether or not the plainti¤ was a smoker.

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