Economic Theory of Bellwether Trials
30 Pages Posted: 3 Feb 2011
Date Written: February 2, 2011
Abstract
This paper explores the informational benefits and costs of bellwether trials. It is the first to articulate and defend a theory of bellwether trials using a law-and-economics framework. While some scholars and practitioners have undertaken descriptive analysis of bellwether trials, or defended them on procedural-justice grounds, they have not accounted for an important attribute that is particularly amenable to economic analysis. Bellwether trials serve the valuable function of price signaling: providing data points for future settlement negotiations about the likelihood of success at trial, as well as the damages awards juries are willing to set for certain claims or types of injuries. Drawing from the law-and-economics literature on the selection of disputes for litigation, this paper explains that bellwether trials inform parties of the likelihood they will succeed on the merits of their claims. In so doing, these early trials channel "easy" cases (from either the plaintiff's or defendant’s perspective) away from litigation and toward settlement or dismissal.
JEL Classification: K13, K41
Suggested Citation: Suggested Citation