Sequential versus unitary trials with asymmetric information

Abstract

Suppose a legal conflict involves a plaintiff claiming to have been injured by the defendant. A unitary trial (UT) is one in which the plaintiff litigates damage and liability at the same time. A sequential trial (ST) is one in which the plaintiff first litigates damage (or liability) and decides whether to litigate liability (or damage) only after the first stage suit is tried. A UT differs from an ST mainly in that some private information is revealed during litigation in the ST but not in the UT. We discuss the effect of this information revelation on the behavior of the agents, the settlement probability, and the corresponding litigation costs. Our analysis can also be extended to other economic applications with sequential information disclosure.