als or institutions in anticipation of a lawsuit that never materializes, or entail ...led medical malpractice lawsuits that later settle or go in court. If there is a lawsuit related to the claim, the data do not contain detailed information about the suit, such as the amount of compensation claimed initially or the process of negotiating a settlement. The authors show that when population growth and overall spending on health care are taken into account, there is no strong positive time trend in the amount of medical malpractice payouts. The average payout ranged between $303,000 and $410,000 during the time period studied, while the average verdict on tried cases was $1,528,525. The distribution of trial verdicts is highly skewed, implying a low probability of a high amount of compensation. This seems to indicate that, on average, plainti¤s who settle recover a fraction of trial awards. However, average payouts include claims that never became lawsuits, as well as lawsuits that were dropped. In addition, without any information from case ...les, it is di¢ cult to account for di¤erences in underlying characteristics of disputes that jointly determine case outcome and ...nal payout. Another recent study of malpractice litigation was performed by Chandra, et. al. (2005). They use the National Practitioner Data Bank, containing information on payments in settled and tried malpractice claims against physicians. The 4% of all claims that result in a trial produce an average award approximately twice as large as the average settlement. Once again, detailed information from the case ...le, including the original amount of the claim, is not available.

Several factors limit the comparison between our study and the empirical literature discussed above. The empirical literature tends to focus on shifts in common or statutory law that alter expected recovery at trial for plainti¤s, while such shifts in legal standards are not present in the data we study. In the area of medical malpractice, where much of the empirical work has been done, plainti¤ verdicts can result in extremely high payments. Along with di¤erent relative stakes due to important repeated play features of the environment, this means that defendants may be more willing to go to court for cases with high expected recovery amounts.

Most importantly, detailed information such as that o¤ered by our data set is rare. Absence of data on the amount of the initial claim means that we cannot compare the percentage of recovery achieved by the plainti¤ across empirical studies. Information on payments made in settlements is usually unavailable, so empirical work has focused on the probability of settlement or on failed settlement o¤ers. As shown by Waldfogel, a standard case selection model can explain di¤erent relationships between settlement rates and measures of plainti¤ success as features of the model such as litigation costs or relative accuracy of parties’ signals about expected recovery change. Clearly, across the di¤erent data sets, legal areas, and time periods studied in the empirical literature, such features of the case selection model can vary signi...cantly, causing di¤erences in the evidence found on case selection, particularly the relative success rates for settled vs. tried cases.

Although this paper does not test a speci...c economic model rigorously, we do feel it is useful to summarize some of the important implications of the 10