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  • 2020
  • Working Paper

Financing the Litigation Arms Race

By: Samuel Antill and Steven R. Grenadier
  • Format:Print
  • | Language:English
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Abstract

Using a continuous-time model of litigation, we show that the increasingly popular practice of third-party litigation financing has ambiguous welfare implications. A defendant and a plaintiff bargain over a settlement payment. The defendant takes costly actions to avoid deadweight losses associated with large transfers to the plaintiff. Litigation financing bolsters the plaintiff, leading to larger deadweight losses. However, by endogenously deterring the defendant from taking costly actions, litigation financing can nonetheless improve the joint surplus of the plaintiff and the defendant. In contrast to popular opinion, litigation financing does not necessarily encourage high-risk frivolous lawsuits.

Keywords

Litigation Financing; Dynamic Bargaining; Real Options; Law; Finance; Lawsuits and Litigation

Citation

Antill, Samuel, and Steven R. Grenadier. "Financing the Litigation Arms Race." Working Paper, November 2020.
  • SSRN

About The Author

Samuel B. Antill

Finance
→More Publications

More from the Authors

    • 2021
    • Faculty Research

    Crisis Interventions in Corporate Insolvency

    By: Samuel Antill and Christopher Clayton
    • 2020
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    Are Bankruptcy Professional Fees Excessively High?

    By: Samuel Antill
    • July 2019
    • Journal of Financial Economics

    Optimal Capital Structure and Bankruptcy Choice: Dynamic Bargaining vs Liquidation

    By: Samuel Antill and Steven R. Grenadier
More from the Authors
  • Crisis Interventions in Corporate Insolvency By: Samuel Antill and Christopher Clayton
  • Are Bankruptcy Professional Fees Excessively High? By: Samuel Antill
  • Optimal Capital Structure and Bankruptcy Choice: Dynamic Bargaining vs Liquidation By: Samuel Antill and Steven R. Grenadier
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