A great deal of research in various academic fields has attempted to identify and understand the factors that might explain why certain civil cases settle, while others proceed to trial before a judge or a judge and jury. This research has been motivated, in part, by the fact that out-of-court dispute settlement is viewed as a desirable social outcome. Trials are costly, not just for the parties, but for society as a whole. Therefore, many scholars have sought to understand why certain cases appear more resistant to settlement than others.
Researchers approaching this question from the standpoint of economics have generally described the category of cases that proceed to trial as resulting from a breakdown in negotiations or informational asymmetry. The breakdown often relates to a failure by one or both parties to understand the risk dynamics in terms of the law and the evidence. Economists predict that any given set of litigants, when provided with full information about the evidence and the applicable law, would be able to accurately and objectively assess the risk of proceeding to trial. These litigants would tend to settle most cases and would avoid going to trial, assuming they were properly informed.
Thus, in a case that proceeds to trial, the economic approach would attribute the failure to settle to one or both parties not fully understanding the case, the evidence, or the applicable law—all of which serve to inform the risk dynamics of proceeding to trial. If the parties were acting rationally and had a full understanding of the risks, they would mutually define a zone of bargaining and would likely reach a settlement point somewhere within that zone, because both sides would recognize the benefits of doing so.
However, researchers in psychology, behavioral studies, and related fields have questioned whether other factors may influence the failure of certain cases to settle. In particular, research has focused on psychological barriers to settlement that cannot be explained solely by a rational assessment of costs versus benefits, or by a breakdown in understanding the risks by one or both parties. While it may be obvious to many litigants and practicing lawyers that there is more at stake in some litigation than just money, it is not necessarily obvious to legal scholars or economists.
The experimental proof of this intuition is significant not only because it facilitates a more scientific understanding of the human factors at play in dispute resolution, but also because it reveals some of the specific mechanics of how non-monetary factors can influence litigants’ decision-making. In other words, this type of research may eventually allow us to catalog and understand most of the factors affecting decision-making in alternative dispute resolution, thereby rendering it more predictable and more effective.